Building My Own House - Income

feeta

Hi all,

I hope this is the right place to post this. Please feel free to move it, if not.

So my family and I are about to embark on the long journey of building our own home.

One question I had was about the finance side of things. I'm going to be doing the vast amount of work myself, which means that I'll need to leave my current full-time job. My wife will carry on working full-time. (this isn't a question about building it myself vs getting builders in - I'm capable of doing it and I would earn less in my current job, than I'd need to pay out to even one labourer - Meaning it makes financial sense for me to take on the work)

Our mortgage adviser has done the research and we are able to get the mortgage we need to build the house, on our current wages. This is fine as I won't leave work until after they've done the checks and the mortgage is in place.

My worry is that once I leave work and work full-time on the build, I'm not going to be earning any money. When we've finished the house build in a couple of years time, and we need to arrange for a standard mortgage (rather than the more expensive self-build mortgage), they'll look at the paperwork which will show my wife as full-time, but me as unemployed, and I'm worried they won't offer the mortgage we'd need (once the build is finished I'll go back to working full-time)

Now, my question is this...Am I able to 'pay myself' to build the house? I realise that I won't actually be making any money, but on paper it would show me as having an income...but is it legal?

My idea is that I set up as self-employed as a sole trader (or ltd company if I need to) becoming the project manager or main contractor for the build, and then bill my wife and I, as the clients, for my services. The money would come from the self-build mortgage (and would effectively circle around, as we'd be paying my business, which I'd then draw down wages from, which would then be used to pay the mortgage along with my wife's income too)

I realise that I'd have to budget for tax and NI and this would slightly increase the cost of the build, but I'm not sure how else to work it so that we can actually get a standard mortgage at the end of the project.

It's worth noting that I'll also be doing some other self-employed work in the evenings alongside the build - so I will have a little *real* income, but nowhere near as much as I have now, and nothing regular.

Any help would be very much appreciated. I've done lots of searching online but can't find any examples of this being done before.

Thank you in advance :-)

Davesnave

Why isn't your question on the Mortgage Board?

http://forums.moneysavingexpert.com/forumdisplay.php?f=15

Although I can't give you chapter & verse, the reason why you have not seen this in your research is because what you propose is not real income.

It wouldn't become income unless you sold the house and took it as profit, which doesn't appear to be what you want from this.

feeta

You're right, the Mortgage Board is probably more appropriate. Can I move this topic there, or shall I start a new one?

I do realise it isn't true income. My question was more about whether the new lender (when we come off of our self-build mortgage) will recognise it as income?

From their perspective, it should look like income I've made through my new business. Or am I missing something here?

Davesnave

feeta wrote: »

You're right, the Mortgage Board is probably more appropriate. Can I move this topic there, or shall I start a new one?

Yes I'd copy and re-submit over there.

You'll find respondents there who know the mortgage business inside -out. Here, you might find a good sparky, or plumber etc.....;) I'm neither!

feeta

Thank you very much Davesnave. I've now re-posted over at the other board.

Thank you very much for your help