Problem getting self employed mortgage

samson1313

I posted this on the house buying renting selling forum about a week ago i tried to just add the link so people could read through the responses i got but it wont let me do that for some reason so heres the original post


I’m intersted in buying a house using a residential mortgage thats up for sale at £150000 i think i would be able to get them down to £140000 i have £90000 deposit so you would think borrowing the £50000 would be easy!
No cause i'm self employed and over recent years have ploughed most my turnover back into new stock building my business up my net profit on my SA302 forms only shows at around £8000 - £10000 per year net profit for the last 3 years, as i said before most my turnover has been put back into buying new stock for the business and my circumstances at the time (i'd moved back in with my family) allowed me to have basically no bills so this small amount was just like spending money for me allowing me an ok living! but cause of this £8000 a year all i can borrow is about 4 times it so aprox £32000 which is £18000 short.
I currently rent a storeroom above a factory for my business that costs me £200 a month, the house i want to buy has a double garage that would replace the storeroom saving me £200 a month plus travel costs etc I also had a business loan which was costing me £244 a month up till January last year which is now clear so again that ment my net profit was effected by about £3000 a year.
So with these 2 factors taken into account I could easily cover a £50000 mortgage where monthly payments would be about £300 a month max so all makes sense really except the mortgage adviser says that all the providers he's spoke to have said they will only go on what the SA302 forms say and thats it.
I thought about maybe a business mortgage but I’m not sure how these work and weather I would be a lot worse off or just wondered if anyone else had a solution to this?
I could buy a smaller house outright but then I would have to keep paying for my storage unit and as it’s costing me £2400 a year and I’ve already been there 6 years it seems stupid to be lining someone elses pockets instead of just paying off my own mortage.

Any help or advice is much appreciated



I've spoke to a few mortgage advisers and even one specialising in self employed mortgages and none of them have a solution, the only way i can think of getting round it is to buy the place on a buy to let mortgage and then just move in myself!
I know i'm not supposed to do this but surely theres a way round this say i say i'm renting it to a friend and then just live there myself!

Can anyone tell me the pitfalls of doing this if i did it for instance and then had to make an insurance claim i wouldnt want the insurance to be invalid or something like that.

chalkie99

samson1313 wrote: »

over recent years have ploughed most my turnover back into new stock building my business up my net profit on my SA302 forms only shows at around £8000 - £10000 per year net profit for the last 3 years,

Spending your takings on extra stock does not reduce your profit. The profit has already been made on the sale.

It sounds, worryingly, as though you may have been declaring your profits incorrectly.

kingstreet

The position hasn't changed since last week;-

https://forums.moneysavingexpert.com/discussion/4892920

samson1313

kingstreet wrote: »

The position hasn't changed since last week;-

https://forums.moneysavingexpert.com/discussion/4892920

If you read this post properly i said that i tried to post the link to the previous post but as a new user to this site it wont let me to stop possible spamming, i then go on to ask the question about buy to let mortgages i just added the old post details to give some background.

samson1313

chalkie99 wrote: »

Spending your takings on extra stock does not reduce your profit. The profit has already been made on the sale.

It sounds, worryingly, as though you may have been declaring your profits incorrectly.

Well as my books were done by a qualified book keeper whos been a book keeper for most their life i would assume it was done correctly

dktreesea

chalkie99 wrote: »

Spending your takings on extra stock does not reduce your profit. The profit has already been made on the sale.

It sounds, worryingly, as though you may have been declaring your profits incorrectly.

Yes, correct if stock is capital. But in the UK for income tax purposes, stock is sometimes regarded as an expense, not a capital item. For some reason the matching principle in accounting, i.e. you book the cost of the item only when you record the revenue and in the meantime it stays as an asset on the balance sheet, doesn't seem to apply if your revenue is below a certain amount.

dktreesea

Well, what have you made profit wise this year? Can you delay some stock purchases in the next six weeks and bring your annual income up to, say, £15k for the current 2013/14 year? That would bring the amount you could borrow up to around £60k, with little or no income tax impact.

Thrugelmir

samson1313 wrote: »

Well as my books were done by a qualified book keeper whos been a book keeper for most their life i would assume it was done correctly

Then you are misunderstanding your accounts. You are not reinvesting the profit but the cash generated. Cash is not profit. A common misconception.

kingstreet

samson1313 wrote: »

If you read this post properly i said that i tried to post the link to the previous post but as a new user to this site it wont let me to stop possible spamming, i then go on to ask the question about buy to let mortgages i just added the old post details to give some background.

If you click on your user name, you can link to threads you started previously by clicking on "find other posts by..."

NB If you intend to live in the property, obtaining a mortgage via BTL route on a property in which you intend to reside is obtaining money by deception.

Yorkie1

kingstreet wrote: »

NB If you intend to live in the property, obtaining a mortgage via BTL route on a property in which you intend to reside is obtaining money by deception.

Just to clarify that the deception offences were replaced by the fraud offences a number of years ago; but otherwise I agree with this sentiment.

Don't risk getting found by going for a BTL when you intend to reside in it. If you get a black mark on your record for fraud, you will find it difficult to get any financial product, including insurance, for a very long time.

I don't have any knowledge of what goes into accounts etc, but what I do know is that if you seek to minimise your tax (legitimately) on your SA302s, then it impacts on your borrowing power - as you have found. You can't have it both ways. Others have suggested doing the figures differently (but still legitimately) for this accounting year, which may well have a positive impact on your borrowing power.

matt1234

samson1313 wrote: »

I know i'm not supposed to do this but surely theres a way round this say i say i'm renting it to a friend and then just live there myself!

Can anyone tell me the pitfalls of doing this if i did it for instance and then had to make an insurance claim i wouldnt want the insurance to be invalid or something like that.

I have just read on another property forum that if you rent out one room to a friend/family member and can produce an AST then this will satisfy the BTL T+Cs.

I don't know if this is true so do your own research.