Is this strictly legal?

kieran2007

Hi all, new to posting but I'm a daily MSE forum/deal scout

Basically at the age of 25 and now with 2 kids (renting a 2 bed) it's high time I get a mortgage.

My problem is that I currently bought a business in February and became sole director.

To make it clear I didn't buy the company, just the business and assets so everything from company to vat number is new.

I was speaking to a friend of the family mortgage advisor, he said without a shadow of a doubt I should sign the company over to my mum/dad, and employ myself PAYE (45k) yearly.

I have a 65k deposit and am looking for a house about 300k so off my head that's about 80% LTV?

My first question is will this really work? He said most places just need 3 months payslips, but surely won't they check the company and see it's started trading? Whether I'm director (salaried) or own 0% PAYE surely it's the same risk to lenders?

My original plan was to stay as director and salary myself 45k a year, the company also owes me 30k as a loan, and I was going to go with santander as I am a santander select customer and apparently get priority everything

Will the bank be a better option since they have seen my income/outgoings for the last 10 years?

I really don't know what to do im hoping someone can help, I really don't want to be declined and have to wait a further 6 months, il have to go through the hassle of moving and renting again which I really don't want to do!!

Thanks

amnblog

Does your family friend not think lenders will ask questions about this?

ACG

Lenders will pick up on you have owned the company but even if they did not - its mortgage fraud.

Obtaining a mortgage by deception (putting the company in someone elses name) IS illegal.

csgohan4

You need a broker to advise you. Do you understand what owning a company entails and the tax brackets to make your pay more tax efficient?


You really need a good accountant and avoid your family friend. Wrong advice and borderline on deception.


45K is not tax efficient. Maybe better to give your a salary just under 10600 which is the 20% bracket and give yourself dividends up to the 40% Taxbracket. Otherwise the only advantage over Paye for another employer is expenses for your own company.


If you own your own company, Lenders prefer 2 years self assessment returns, If you want the best deals. Otherwise you will be limited if you go down the net profits route.


Whatever you do don't rush into buying a house. You need to bide your time. Maybe better to stick to your usual job than rely on your company for outgoings.


Important to seek professional advice, have you thought this through, can you afford a mortgage, can you prove your salary and have low enough outgoings? Remember with children your disposable income will be less.


Do you earn enough to get a 300k mortgage? Remember the multiplier depends on your circumstances and can go up to 4.5 but not always. Usually 3.5 to 4.0


45K salary doesn't look like it's enough for a 300k mortgage even taking your deposit into consideration.


Also the deposit yours or from someone else.

cns06

I can see where you are coming from but I can only see that as a bad idea. Your tax position is going to be much worse just to start with. It may be so bad that you don't get any gain from not renting for the next couple of years. Sounds like you need to get some proper advice from a specialist and someone who knows your *exact* circs.

Dr._Shoe

I would continue renting for a couple of yearswhile you get the business off the ground. I'm guessing you're a sole trader? If so, if the business went bust you'd end up losing your home, if you rent this won't happen. If it's a limited company it would be easy to check if it's been signed over to your parents.

Your friend doesn't actually know what he's talking about and a wise man once told me: "Advice is only worth what you pay for it" then presented me with a bill for £100,000!

kieran2007

csgohan4 wrote: »

You need a broker to advise you. Do you understand what owning a company entails and the tax brackets to make your pay more tax efficient?

Yes I understand takin the 10k threshold then dividends after, the reason behind going onto 40k was only to take the wage for 3 months, then revert back to company owner.


You really need a good accountant and avoid your family friend. Wrong advice and borderline on deception.

I do have a very good accountant who has basically advised against it !


45K is not tax efficient. Maybe better to give your a salary just under 10600 which is the 20% bracket and give yourself dividends up to the 40% Taxbracket. Otherwise the only advantage over Paye for another employer is expenses for your own company.

As above

If you own your own company, Lenders prefer 2 years self assessment returns, If you want the best deals. Otherwise you will be limited if you go down the net profits route.

Yea it's a LTD company, it previously has turned over 190k with 65k profit yearly, but problem is I didn't buy the business. Maybe in hindsight I should of...

Whatever you do don't rush into buying a house. You need to bide your time. Maybe better to stick to your usual job than rely on your company for outgoings.

My company is my job!


Important to seek professional advice, have you thought this through, can you afford a mortgage, can you prove your salary and have low enough outgoings? Remember with children your disposable income will be less.

Yea I can afford it I believe, after all outgoings I'm left with about £1500 a month currently


Do you earn enough to get a 300k mortgage? Remember the multiplier depends on your circumstances and can go up to 4.5 but not always. Usually 3.5 to 4.0


45K salary doesn't look like it's enough for a 300k mortgage even taking your deposit into consideration.




Also the deposit yours or from someone else.

It's my deposit from 4 years savings.

Do you think speaking to my bank would be a good option at this point? Can they offer me deals based on my income/outgoing with them compared to just basing it on my business?

kieran2007

ACG wrote: »

Lenders will pick up on you have owned the company but even if they did not - its mortgage fraud.

Obtaining a mortgage by deception (putting the company in someone elses name) IS illegal.

So can you give me any suggestion as another way about this with my current circumstance ? Is my bank a viable option?

kieran2007

amnblog wrote: »

Does your family friend not think lenders will ask questions about this?

Apparently he thinks not! ?

ACG

Wait until you have 1 years accounts and speak to a broker. There will be lenders who will look at it - although your likely to need a 15% deposit, you may get away with 10%.

Pixie5740

Not to mention that if you become an employee of a company your parents own, it will be a total ball-ache for them in terms of being compliant with HMRC and employment legislation.