Plan for getting the mortgage we want

bigbananas

I am a partner in a company and I take £2,500 a month as a wage.
I have been working in this company since September 2013. Previously I was self-employed. But I have merged my clients into this new company I set up with a financial partner. I am not doing anything different except I now manage people and have a regular wage. My previous tax returns of self-employement show 2 years of increasing income, and then a slight drop last year (as I found a great accountant!).
I have an excellent credit rating.
No outstanding debt.

My wife:
Is a self-employed milliner but hasn't been earning much due to just having twins. Earnt around 5k last tax year.
Her Experian credit rating has a couple of flags, most troublesome 1 being issue with missed a monthly re-payment on a shopping credit account. But we have paid this account off fully, so now no outstanding debt.
Receives minimal child maintenance.
Does not claim tax credits.

We can borrow 40k off a friend until we sell the house.
We are living in rental, paying £950 p/m. Never missed a payment.
We are trying to sell our house, that we bought for 195k, with 40k equity in.
I own a 2nd property that I rent out @ £350 profit a month. 7k equity in it. Had for 8 years.

We would like to buy a 250-300k house.
We achieved a 210k mortgage in March, but the house sale fell through due to overlooking the requirement of having to be released of liability of our house. As we had 40k to hand I couldn't understand the problem. We also told a few porkies such as: no children, my wife was to start work as an admin for
25k and I hadn't started a new job. But when it came to trying to get a new mortgage without the concern of selling our house, it came back with a 100k limit due to the new "constraints" they brought in in April.

The plan:
1. Have my wife "work" at a friends workplace for cash. Total salary being just under the £9,440 limit to avoid paying PAYE and tax.
2. If we can't sell our house soon, rent it out to hopefully release the "liability".
3. Stay in rented until we show enough of what they want to see!

Questions:
1. Will the Mortgage underwriters request bank statements to prove income?
2. Is is advisable to try and claim tax credits?
3. What are our chances?
4. Is it worth my wife paying a regular utility bill - will that improve her credit rating?

Annisele

bigbananas wrote: »

Questions:
1. Will the Mortgage underwriters request bank statements to prove income?

Maybe - but you should assume that they will. If you declare income that you can't then prove, you'll make life very difficult for yourselves. Google "National Hunter" for more details.

Telling "porkies" to lenders is usually a bad idea, as if they do find out they don't look kindly on it.


2. Is is advisable to try and claim tax credits?

No idea. I think that if you're entitled to them you should claim them, but I don't know anything about them.

3. What are our chances?

I think you'll struggle - see below.

4. Is it worth my wife paying a regular utility bill - will that improve her credit rating?

I don't think that will make any difference, but I see no harm in it.

In general, lenders won't be happy with you borrowing your deposit. The £40k from your friend will have to be declared as a loan, and the lender will assume you'll be paying some of it back each month - and that commitment will reduce the amount you can borrow.

Unless you sell your current property, or properly convert it to a BTL/get consent to let, I think you're trying to borrow far more than your income can support. Are you trying to use the £350 profit on your second property towards your income? Many lenders won't like that (and especially not if you don't have BTL/CTL on that property).

I'm not sure if you're a partner in a partnership or a director in a company, but in either case the lender is likely to want to take a view on the long term viability of whatever you're doing.

I think yours is probably a case for a broker. Being self employed with less than three years of accounts makes things hard (not impossible, but harder). Missed payments makes things harder. Borrowing the deposit makes things very hard indeed.

kingstreet

Go and see an independent broker now.

They will help you to plan for when you want to apply and talk you out of daft and potentially "unwise" ideas.

Obtain all three versions of your statutory credit files so you can ensure there are no issues which require amendment/attention.

Thrugelmir

bigbananas wrote: »

We also told a few porkies such as: no children, my wife was to start work as an admin for
25k and I hadn't started a new job.

Application data is compared through National Hunter.

http://www.nhunter.co.uk/

Fraud is taken very seriously.

and then a slight drop last year (as I found a great accountant!).

Which probably meant that your stated income was incorrect previously. As you had failed to claim everything you were entitled to.