Self-employed mortgage question

Fractal

For the past 3 years I have earned 50k (2011), 47k (2012), 40k (2013) net profit per annum and my partner has earned roughly 10k net profit per annum. I currently have a £50,000 mortgage on repayment.


Based on this, what is the maximum we can get for a mortgage and is the max common multiplier 4x or 5x? I would like a figure including and excluding the mortgage above. Also, what is the maximum allowed age for the end of the mortgage? 75?


Thank you!

kingstreet

Lenders now use affordability calculators which analyse your income and outgoings to assess affordability. The mortgage term will also influence this.

You would be able to borrow to 75 only if you can evidence sufficient income past state pension age (determined by your current age) otherwise, you will be unable to borrow past the point you reach that age.

Your declining profit will be an issue for some lenders.

Fractal

I'm 45 years old and my partner is 56. Will the lender take my age into consideration or restrict our joint mortgage term to 10 years due to my partners age?


I would think not as I earn more but I am not sure.

Leon_W

Yes, a lender would restrict the mortgage term to retirement age in normal circumstances unless proof of income post retirement is available.

Fractal

How could income past retirement be proved if it is achieved via continued self-employment?

HappyMJ

Fractal wrote: »

I'm 45 years old and my partner is 56. Will the lender take my age into consideration or restrict our joint mortgage term to 10 years due to my partners age?


I would think not as I earn more but I am not sure.

They would restrict the term based on the younger earner. So based on you and 30 years....that's if you have every intention of working as you are until you are 75. Most people want to retire about 65 so if you mention that they'll restrict to 20 years.

kingstreet

In my experience, lenders will limit the term so it ends before the oldest applicant reaches state pension age, which for a 56 year old man or woman is age 66.

A longer term may be possible only where continuing income beyond age 66, or at the very least, pension scheme membership can be proven.

amnblog

HappyMJ wrote: »

They would restrict the term based on the younger earner. So based on you and 30 years....that's if you have every intention of working as you are until you are 75. Most people want to retire about 65 so if you mention that they'll restrict to 20 years.

Most Lenders do the opposite of this, restricting the term based on the older borrower.

If your Partners income is not used for the affordability calculation, there are lending options available that will base maximum term on your age.

Fractal

Regarding the declining profit, would lenders still calculate the average from the 3 years of net profit which in my case would be around 45k?

kingstreet

Fractal wrote: »

Regarding the declining profit, would lenders still calculate the average from the 3 years of net profit which in my case would be around 45k?

I suspect it will be an average of the last two years, or in some cases, the final year only.

You need to speak to an independent broker about this.

amnblog

Fractal wrote: »

Regarding the declining profit, would lenders still calculate the average from the 3 years of net profit which in my case would be around 45k?

Declining profit almost always means latest figure only.