Self Cert Help please ?

MadMonkey

Hi - 5 years ago my husband became self-employed.

He also wanted to buy his council house. At the time i was an undischarged bankrupt so obviously I cannot be part of the deal.

He got a self-cert mortgage with a projected income. It was 100% mortgage (i.e no deposit) for 28K. The property was valued at 56K.

Now hubby has now changed his business slightly to one that will have a greater income and therefore we do not want to use the completed accounts for the past 5 years as these will give a lower turnover than is expected.

We are looking to sell this property for about 155k and buy another for 165k so would want to increase the mortgage to 38K (maybe a bit less as we have paid 5 yrs but that won't have made much of a dent).

Anyway what i am wanting to ask is how does he word the statement / letter that states his projected income ?

We are seeing our financial advisor next week and want to have this ready to save time really - it is the same FA we saw for the initial mortgage.

Also we only want to know *if* we could get that amount not actually go ahead - can they tell him this ?

Thanks
MadMonkey

When i say WE i mean HIM as it is his name on all paperwork.

homer_j_3

Income used should be on current income not projected income. What has his net profits been for last 3 years as it may be possible to get the mortgage on full status rather than self cert basis.

MadMonkey

The past 5 yrs income are not enough to get the mortgage as we incorporated a lot of start up costs and other expenses as advised by our accountant - whilst this kept the tax down it also means the net profit is not high enough.

The new business will have a much higher net profit.

herbiesjp

Lets try and work this out

What is the new purchase price?
What is the deposit you are putting down?
What is the mortgage amount needed?

What has been the NET profit for the last 3 years ( i know you say its low but lets just see)?

What is the projected new income?

DO you have any income?

MadMonkey

The purchase price would be 160,000
The deposit would be 150,000
Mortgage already is 28,000 so would want to increase to 38,000 approx.

The net profit for the last 3 years is not workable at all - the first year was about 10k but the second year was a loss due to a lot of new purchases and the 3rd yr is about 5k again due to expenses being offset.

The projected profit for the next 3 yrs is 15,20,20.

We have worked out that we can comfortably pay £300 per month on a mortgage.

Credit wise mine is obvioulsy horrifically bad as i am a discharged bankrupt but i am not having anything to do with the application. My husbands is not bad (no CCj's but there is some loan defaults from about 8 yrs ago. He has 1 credit card which has about £200 on it and has always been overpaid each month but as he does not have loads of credit he does not have a great record iyswim ?

My income is about £450 per month plus child benefit of £170 but we were told last time that mine could not be taken into account as that would make us financially connected and we did not want that with my bankruptcy.

We know from last time that we are not in a position to waltz into a bank and ask for a mortgage without them laughing us out of the door so the FA with the self cert is the only option.

homer_j_3

Your credit file revolves on a 6 year basis so any missed or late payments or defaults beyond 6 years should have disappeared.

You can check your credit file at https://www.experian.co.uk so it may be worth getting this to see exactly what is on there. If he has been ok for last 8 years then his credit should be ok which is good news.

If your purchase is 160k and your deposit is 150k then your mortgage is 10k so not sure whether those figures are correct or whether you meant to say the deposit was 38k less the 160k?

How long ago were you bankrupt and discharged?

MadMonkey

Sorry cocked the figures up a bit there

We are looking to buy for 160k.

We would have a 125k deposit to put down and then need 35k mortgage.

Current mortgage is 25k.

I was declared bankrupt in 2001 and discharged in 2004.

homer_j_3

So you have been discharged now for 3 years or nearly 3 yrs depending on the dates in 2004. There may be some lenders that would consider you at ok rates.

Just go to your adviser and give them the full information.

Your income should not be considered even under a self cert basis if you are not being named on the mortgage. By doing so, it will be seen as fraud should you be caught out and your adviser would be in trouble too. The income being used for self cert should be the actual earnings being received by your other half not ones that they are prediciting. If you state that you are earning more at the moment than you actually are and HMRC get involved, don't be suprised if they think you are investigated for tax evasion.

What ever way you look at it, just do what you are doing with your eyes open and if there is a perfect legal way of doing it, why not do it that way?

herbiesjp

Indeed there may be totally legal ways of getting the mortgage agreed - so please do not be tempted to go down a route other than being 100% totally honest.

There are employed people that may get bonuses, lenders will not take those into account until the have happened. YOur future earnings will be treated the same way

Have a word with a whole of market adviser as there may be some realyy straightforward ways of getting the mortgage agreed

HTH

MadMonkey

We are not being dishonest - sorry if it appears that way ?

My husband changed the work he undertakes from February this year and the change in income has been hell of a difference which is what prompted us to consider moving in the first place.

When he got the initial mortgage he signed a self-cert that his income would be 10k per annum projected. This figure turned out to be correct as that is what he has earned - sometimes more but then when you add in the initial expenses the net profit is lower - this was worked out by the accountant.

We then had a bad year last year where loads of things broke down and needed replcaing leading to a loss overall when replacing these were taken into the accounting.

It just means that if we provided the past 3 yrs accounts then they would not accurately portray the next 3 yrs income as 1) the work has changed to more profitable and 2) there really cannot be any more big purchases as we have paid out for everything i can think of and these items should not need replacing for at least 5 yrs.

So it is not possible to slef cert on projected income ?