Self employed issues

cns06

Hi, first post hope to get some advice. Sorry its a bit of a long one.


I am self employed and my wife and I have been looking to buy a new house for a couple of years. We currently have a small mortgage (£70k on £200k prop) and had no issue getting this 10 years ago (I know the market has changed!). Current mortgage has 4-5 years to run as we over pay by 2x.


We only take a small salary + small divs from our company - mostly because our outgoings are very small and we don't really need to drain the business of its profits. We put a good chunk into our pensions via the company and we both have a decent company car.


Other than the mortgage we have no debt. I have a CC which is cleared every month. Wife same. Don't take holidays or have kids etc.


To cut a long story short we were looking to buy a house c.£400-450k. Putting 40-50% in deposit (equity plus some savings) - however when we approached our bank they told us our current income (£25k joint) was not enough. Fair enough says I.


We double our income to £50k (what they said they require) and wait 12 months. In the mean time the prices of the property we have been hoping to get for c.£400k are now c.£500k - some even more. Our house still seems to be worth £200k.... not sure how that's working but that's what I am being told.


Go back to bank, at £300k they now want c.£70k income!! Whats worse is they tell us that they now average the last 2 years.. so it really needs to be more than that...


I feel a bit like the market is moving away from us faster than we can increase our income! I can increase our income a bit more yet - but again we need to wait till the end of the tax year for it to make any difference. By which time houses will be up another 10-15%...


I guess they call these first world problems - we can stay where we are and still have a roof over our heads but we always wanted a nice house to make up for working long hours etc and I feel like because we have been prudent with our income and not taken every penny out of the business we could have already moved and been done with it.


It was my understanding that banks looked at profits on the books - but now I know this seems not to be the case and now its just based on what you actually take out of the business.


What I find frankly ridiculous is that a £300k mortgage is only a few hundred quid (about £250) a month more than what we currently pay as we over pay 2x now! So I am taking tens of thousands out of my business to cover an extra £250 a month. I just don't get it.


Anyway - that's all - anyone been in a similar position?


Thanks!


PS sorry for the rant!

ACG

I stopped reading partway through but...
There are lenders who will go off latest years figures so if youhave1 years showing £50k it should be possible.

If you left money in the business rather than a pension it might have been possible to use retained profits rather than actual wages.

In short get your accounts and SA302s and go and speak to a broker. There could be options at high street or near high street rates.

GMS

What are the profits for the last 2 years? There are lenders who will use profits rather than salary and dividends.

Broker would be useful for you.

amnblog

The policy outlined by your current lender is not the same across the market.

If your business has good profit the right lender can handle this without working solely on your drawn income.

If you and your co applicant between you own more than 50% of the shares, and your total of PAYE and before tax profit exceeds £75,000 I would expect to be able to place this case.