Proof of Income when fixed-term ends?

LD300

Hello all,

Very grateful for any and all replies from you knowledgable bunch!

Me and my partner are about to (finally) become first time buyers and we are trying to decide between 2 and 5 year fixed rate deals. In normal circumstances I would definitely go for the 2 year, however:

While repayments will be no issue, our 'provable' earnings are liable to be lower in 2 years time. My partner is full-time employed at the moment whereas I am self-employed. To aid our application for the past two years I have claimed far lower expenses than I am allowed to (one of the few advantages of being self-employed is that you can legally claim for all types of nonsense).

This obviously costs us a lot of money (around 4K per year) so once we have the house I will stop doing this. My partner is also considering becoming self-employed after we buy as well, so her income will most likely appear to be smaller also, even though the reality is our actual financial resources will remain unchanged.

So my question is whether when the fixed-rate term ends we will have to demonstrate proof of earnings before getting on a new deal. I'm sure this would be the case if we changed provider, but what if we stayed with the same lender? I've seen some posts suggesting for example with NatWest you can just login to your account and select the deal you want.

If that is correct, should we be looking at some lenders over others in terms of the rates they offer to remain with them when the 2-year term comes to an end?

What would your advice be in our situation?

Many thanks!

Thrugelmir

LD300 wrote: »

(one of the few advantages of being self-employed is that you can legally claim for all types of nonsense).

Who prepares your accounts?

LD300

Who prepares your accounts?

a certified accountant, all above board!

Welshbigman

I would go for the 5yr, similar to yourself I am self employed and have been in the same situation where I am able to (legally) take a large amount out of the company as expences, thus meaning it shows a lesser income/profit. In fact we are in the process of purchasing (all being well should be sorted in the next couple of weeks). and have gone for a 5yr fixed, however our decision was based in the main on surety of repayments

Boredatwrork

From my experience they dont ask for full proof of income if you remortgage with the same company, (at least halifax didnt). Just give them a call and ask.

LeoTLion

Just coming to the end of 5 year fix with Barclays, no need for proof of income, all switch rates available online to choose from.

Phil_H_MLIA(dip)_Cert_PFS

Forgive me for saying so but you may be missing something here..

There is no-one on this or any other forum that can tell you how any bank will operate in 2 years time. Many are still getting used to the most recent Mortgage Credit Directive legislation and who knows what might be around the corner.
Anyway, that aside, get your intermediary to give you a full cost analysis of the 2yr vs 5 yr figures.
Or, if you choose to do it yourself then take the interest rate differential of the 5 over the 2 and multiply that by 2 - this effectively gives you the total additional cost of the 5 year rate during the first 2 years (ie your rate premium).
Then take that total and divide by the remaining years of the longer rate (in this case 3)
Then ask yourself, do you feel that interest rates with the first 2 years could increase so that any new rate acquired from year 3-5 could cost you that differential (sorry easier with pictures).
Then factor in the mortgage arrangement fee, ie typically £1k, over 2 years and over 5 years.

There is no set answer as it is relative to the amount you are borrowing which of course is then influenced also by Loan To Value - so your opinion on house prices is also relevant as is the type and condition of any property you buy (ie are you going to add value?)