Mortgage on self employed income

Mummy_Bean

Our current mortgage we got when both me and hubby were employed PAYE, since he was made redundant and has gone self employed - he has over 2 years accounts and for most of this time he has worked for the same contractor who takes his tax and provides monthly invoices.

When we go to apply for the mortgage what physical evidence do we need to provide for his income?

Also the contractor he works for a recently given him a pay rise resulting in a much larger gross salary - will lenders lend based on his last years salary or his current (we can get letter from his contractor saying work is due for at least 12 months).

I know mortgage companies now do affordability when working out lending capability but will they still lend 4 or 5x our joint salary (minus expenses and liabilities) even though his is self employed?

Thanks in Advance

Wh05apk

If he has accounts and submitted tax returns, he should request SA302s, as this is what most lenders will use.


Potentially 4-5x joint income could be possible, some lenders will average his income over the last 2 years, some will work on last years, but they will use the net figure, so if he is claiming for anything that moves, his income could show less than expected, hence why he needs his SA302s.

kingstreet

If he works in construction, he may be classed as a CIS sub-contractor. Basing his income on his invoices may result in a better borrowing amount.

It may be worth discussing this with a broker.

ExpertAdvice

Hi,

Just to clarify the above, you need to request the SA302s from HMRC (01619319070 / 08459154655) that shows how much income has been declared to inland revenue and the tax paid on the declared income. Also, when you or your accountant calls HMRC, they can send the SA302s via fax but the reference number i crossed out and it's not accepted by most of the lenders. Therefore, you will need to request them by post which may take upto 2 weeks.

Secondly, since your hubby is self-employed, recent pay rise wouldn't really help as the lenders would go with what's on the accounts or on the SA302s. Once he declares his income for the current financial year with higher figures, only then it would be considered.

Lastly, most lenders take average of 2 -3 years income if its been rising and would take the latest figures if the income has declined from the previous years. Based on these figures, generally 4-5 times is possible.

Mummy_Bean

Thanks. Yes he CIS scheme so we have monthly invoices which show his gradual increase in earnings and then his more recent larger increase in earnings.

I will send off for the forms you mentions - we dont have an accountant I normally do his returns for him.