Would I Get A Mortgage?

WannaBLoaded

Hi, it seems a few brokers frequent here so i thought i'd see if anyone can give me a ball park idea of whether i would get a mortgage.

My situation

self employed
1 years accounts (£9500 profit + about £2500 working tax credits)
3 defaults (all over 4 years old) total about £3000
first time buyer
27 years old

What sort of loan to value would i get? Ideally i am looking at obtaining a run down property for about £70k

I currently have £15k as a deposit but this could be £25k by the end of the year. So a fairly big deposit for a 70k house...?

Thoughts welcome? Just want ball parks of whether you think it could be possible, you don't have to tell me its definitely possible.

And is commercial finance easier to obtain?

Thanks in advance.

ACG

General rule of thumb is around 4-5x income. Personally I think on £12k I would probably be working at the lower end of that as a larger part of your income will be taken up with the basics (food, utilities etc).

£48-55k mortgage plus your deposit gets you to around the £70k figure. However the property needs ot be habitable (heating, hot running water, secure etc).

Commercial finance can be easier but it would be significantly more expensive and would depend on the circumstances.

tomtontom

Keep in mind tax credits are falling next year, and will quite possibly do so again the next year - I wouldn't rely on them as a long term source of income.

WannaBLoaded

ACG wrote: »

General rule of thumb is around 4-5x income. Personally I think on £12k I would probably be working at the lower end of that as a larger part of your income will be taken up with the basics (food, utilities etc).

£48-55k mortgage plus your deposit gets you to around the £70k figure. However the property needs ot be habitable (heating, hot running water, secure etc).

Commercial finance can be easier but it would be significantly more expensive and would depend on the circumstances.

Interesting to see that some lenders would go to 5 times for bad credit.

I wouldn't be put off by commercial finance for the first property, i guess it would give me more motivation to get it refurbished and back on the market and it beats having to rent.

What are the tax implications of commercial finance? I know that you can have one main residence that's tax free so whatever profit i would make would be mine, but i presume commercial finance and the profit on the sale of the house would become taxable?

Also, how extensive does my accounting have to be? For the last year i basically have all of my bank statements and have highlighted the income in marker pen and a folder full of receipts for expenses, is that good enough or do i need to get an accountant?

Cheers.

tomtontom wrote: »

Keep in mind tax credits are falling next year, and will quite possibly do so again the next year - I wouldn't rely on them as a long term source of income.

I was overpaid last year on them and will have had about 14k go through my business account over an 8 week period so it's a safe assumption that i am off them now and will probably owe them money because i think i still get 100 a month from them.

This is why i am bugged i can't wait until april next year because i would have better earnings by then, unless mortgage companies accept part year accounts too?

amnblog

WannaBLoaded wrote: »

unless mortgage companies accept part year accounts too?

They don't apart from for Professionals in specific circumstances.

ACG

I have just written an essay but then deleted it.

I think you should sit down and get proffessional advice from an accountant and then a Mortgage advisor.

Ensure you understand fully the tax implications of the different routes. You need to know at what point the figures no longer stack up. The last thing you want is to end up with a tax bill you had not accounted for.

There could well be no tax, but find out from a professional for your specific circumstances.

You also need to be sure you understand the rules of mortgages - for instance there is a 6 month rule that most (but not all) lenders follow. Whereby you would struggle to sell it within 6 months of buying it.

I have done up a couple of properties, but bar the first property where I just jumped straight in after watching too much Sarah Beeney or homes under the hammer I have always turned a profit. The first one, thankfully I broke even but it took me some time to get my money back. Do the ground work and dont think that a few hundred quid on professional advice is a waste of money as its probably the best money you can spend, you will use that advice over and over again on every property.

It still ended up being an essay, just a little shorter.

WannaBLoaded

You know the restriction on sale within six months, is this still the case for portable mortgages and are they available to bad credit?

Cheers.

kingstreet

Portable means you can move the rate from an old mortgage to a new one, if you qualify for the new one.

It doesn't mean you can move a mortgage from one property to another, as you can't.

The six month "rule" would be one of the things stopping you from qualifying for that new mortgage.

WannaBLoaded

kingstreet wrote: »

Portable means you can move the rate from an old mortgage to a new one, if you qualify for the new one.

It doesn't mean you can move a mortgage from one property to another, as you can't.

The six month "rule" would be one of the things stopping you from qualifying for that new mortgage.

Ah so it's the rate not the actual mortgage.

I was talking earlier with my dad about this and he likes to think he's a bit of an expert at all this stuff, in fairness to him he is a clever guy but often thinks just because he says something it must be true. I now look forward to telling him his portability stuff is a load of b0llocks

It wouldn't be the end of the world not being able to buy and sell withing six months, it just means my hopes of getting two done in a year are slim until i build up a pot of money so that i can buy places without selling the first, but then i will have to look into taxation.

I am going to end up having to approach an accountant anyway most probably to sort out my income so i guess i can ask them some questions.

kingstreet

More here;-

http://www.moneysavingexpert.com/mortgages/porting-your-mortgage

_CC_

ACG wrote: »

£48-55k mortgage plus your deposit gets you to around the £70k figure. However the property needs ot be habitable (heating, hot running water, secure etc).

Would someone with an income of less than £10,000 in the past year obtain a x 5 mortgage?

"WannaBLoaded" will have to change their username to "WannaBDebted"