Self employed and Mortgage Calculators?

CreditCrunchie

Hi all, a recent post by another member jogged my memory and I wanted to ask if anyone knows a reliable online mortgage calculator that can be used for the self employed? I ask because some (such as natwest) just ask for gross income, while others stipulate that for SE it must be based on the last 2 or 3 years average NET income. Obviously using these two figures gives very different answer amounts!

ACG

There is no "one" calculator. Every lender has their own way of doing things and the figures given can vary massively. Some will average the last few years, some will use the most recent if increasing profits.

It will depend on your commitments, dependents and how they calculate it.

bonbon49

All lenders are different, so you'll need to check out each individual lender's criteria. Our lender asked for the last two years SA302 forms to prove income, and then took an average gross income for the two years.

kingstreet

Lenders take "net profit" which is box 30 on your SA Online form, no-one takes gross income, or turnover, for the self-employed.

Net profit is the figure before your personal allowance, tax and NI are deducted, the same as gross salary for an employee.

Take an average of the last three years net profit and you'll get the most accurate calculator output.

Obtain your last three years' SA302s from HMRC and lenders use the average of the three years, use the figure against the "Total Income Received" entry, not the "Total Income On Which Tax Is Due" figure.

CreditCrunchie

I have my SA302's already and found HMRC very helpful in faxing them when requested. However what do you mean before personal allowance? The way I have been trying to work it out is gross - personal allowance - expenses - 25% then adding back on personal allowance and taking that amount.

There is a difference of 60 - 100k in the estimates given when I use either the above, or my average gross :-/

If it makes any difference we have no dependents, no debt, and our biggest spend after rent is food shopping, and would have a combined gross income of around 64k (he is employed). My income is increasing.

CreditCrunchie

OK I'm really confused now as different websites say different things. Is net supposed to be after expenses AND tax (as in what I owe) or just expenses?

kingstreet

Gross profit, after capital allowances and allowable trading expenses but before personal allowance, tax and NI.

This is the figure in box 30 on your SA Online input, or the figure next to "Total Income Received" on your SA302.

Take an average of the last three years.

Your living expenses come after this. Do not deduct them in the above calculation.

CreditCrunchie

I mean business expenses by the way. Thank you kingstreet. Using that figure most of the calculators come out around 216k - 260k which is better than I was looking at before We only want a house priced around 170k with a 15-25% deposit so hopefully we should be fine.

amnblog

Figures derived from borrowers using lenders online affordability calculators will be unreliable as you need to know how to use them correctly.

For accurate figures ask a broker.

CreditCrunchie

I'm two years off Ann and just trying to get an idea of how much deposit I can reasonably save and what that will get us. Not willing to or ready to spend money on brokers yet.

kingstreet

CreditCrunchie wrote: »

I'm two years off Ann and just trying to get an idea of how much deposit I can reasonably save and what that will get us. Not willing to or ready to spend money on brokers yet.

I know of no broker who charges before submission of a full mortgage application, so preliminary advice should cost you nothing.