Tenants In Common To Get Higher Mortgage

danixavi6

Hello

Quick explanation of my situation. I am self employed. I have a LTD company in which I am the sole director and employe. Basically the company is just me but it minimises my tax bill operating as a company.

Problem is mortgage lenders won't see it that way and only take my small salary and dividends that I pay myself as my "income" even though realistically the company turnover is my income and is more than enough for the type of mortgage I need. Basically I pay myself a small salary and take maximum dividends before I hit a tax threshold. All expenses that offset my profit are expenses that I would have to spend out of my salary if I was to earn the same amount as a salary.

So to get a mortgage Im wondering if I can do a tenants in common deal with someone I know where I am 99% shareholder and they are 1%. I pay everything and they do nothing. They are just there to prop up what mortgage I can be given. Is this possible? The second person would obviously not be living with me so not sure if thats allowed? And if this second person already owns a property would I then be stung by second property stamp duty surcharge even though I am a first time buyer? Also is it possible to "buy out" the 1% second person after a few years once the mortgage is lower so that they are no longer involved. Any advice would be appreciated.

Thanks
Danny

kingstreet

There are lenders who take the company profit into account in calculating mortgage income/affordability and not director's remuneration and dividends.

You appear to need an experienced independent broker.

Let's just forget the other thing, eh? It isn't workable. First off, they would be 100% liable for the mortgage and in line for only 1% of the equity? You might want to look up "joint and several liability."

TrickyDicky101

DannyGimenez wrote: »

Hello

Quick explanation of my situation. I am self employed. I have a LTD company in which I am the sole director and employe. Basically the company is just me but it minimises my tax bill operating as a company.

Problem is mortgage lenders won't see it that way and only take my small salary and dividends that I pay myself as my "income" even though realistically the company turnover is my income and is more than enough for the type of mortgage I need. Basically I pay myself a small salary and take maximum dividends before I hit a tax threshold. All expenses that offset my profit are expenses that I would have to spend out of my salary if I was to earn the same amount as a salary.

So to get a mortgage Im wondering if I can do a tenants in common deal with someone I know where I am 99% shareholder and they are 1%. I pay everything and they do nothing. They are just there to prop up what mortgage I can be given. Is this possible? The second person would obviously not be living with me so not sure if thats allowed? And if this second person already owns a property would I then be stung by second property stamp duty surcharge even though I am a first time buyer? Also is it possible to "buy out" the 1% second person after a few years once the mortgage is lower so that they are no longer involved. Any advice would be appreciated.

Thanks
Danny

And that sounds like tax evasion - so I would have a word with your accountant...

danixavi6

My expenses are legal what I'm saying is for example if i were to be full time on the same salary as my turnover i would still be spending my own money on travel to get to work but that would not effect my salary. Instead I am allowed to expense travel in my company. Pretty standard. But it just makes lenders think that I am earning less because it comes off my profit.

The other party would understand that they are liable but I can more than afford the mortgage I am looking to get so it would just be a trust between us. Just wondering if its something that is doable or not?

mightyreds

You may be able to afford the mortgage now but in so many years time the situation may have changed dramatically and this person is still liable for your property.

I personally wouldn't go anywhere near anything like that.

danixavi6

Yeah thats why I asked if I could buy out the other person after a few years. I understand how it sounds but I'm asking if its possible and about stamp duty etc not if you would recommend it

TBagpuss

You would have to be lear with the lender what you were doing.

The extra stamp duty would kick as it wouldbe a seondproprty for the other owner.

It's a terrile deal or them as it means they take on significant risk for no return

It culd be awkward for you as you would need their cooperation if / when you wanted to sell,.

I agree with Kingstreet that your best bet is to talk to an experienced mortgage broker.

If the situation is tahn based on your total income you would be eligable for a higher mortgage then you might consider incresing your salary and reducing your dividends. It's not as tax efficient but it might help with the mortgage, but take advice first.

PersianCatLady

Basically the company is just me but it minimises my tax bill operating as a company.
Actually to me it sounds as if you are trying your best to make your slightly dubious tax evasion scheme sound acceptable.

danixavi6

Thanks for the replies. Yeah I would increase dividends and salary etc but its too late for that now. I would have to do that for a year or two to then have those accounts ready and by then house prices would have probably gone up by a ridiclious amount again. I want to get on the ladder ASAP before it becomes unobtainable so i am trying to see what options i have now.

nLdn

Speak to a broker who can advise. I used Coreco, who were brilliant (and much cheaper that some of the ones who advertise themselves as being for self employed).