Help to get around affordability assessment - self employed and low "nett" income

hanabana

Please help, currently stuck between a rock and a hard place and no longer know where to turn! apologies for a long post!

I am currently in a rental property, family of 4 and been renting here 10 years, all rent paid on time, no issues etc until January last year when our old Letting agency (small local family run business) retired and sold their portfolio onto a massive Letting agency who have increased rents charged fees for this that and the other, not only upsetting us as tenants but now the landlord. so much so our landlord is no longer renting our property out (even privately with no agency involvement as we have tried this option) From November 2017. so basically by November we need somewhere else to live. ideally sooner.

so we want to buy;
we can't afford a full mortgage as we would require a 3 bed house and in Surrey
we have 15-20k available for a deposit
we looked at shared ownership and have properties available to us if we can pass the affordability assessment

all looks great you think?
then you put all the financials on paper.
I am self employed and have been for 8 years, my accounts are all done correctly and i have an accountant but for my industry there are a lot of ofset expenses meaning that although i get paid in excess of £2K every month my tax return is for less than 50% of this. if going on basic figures of tax return and wage slips then credit cards and a car finance it actually looks as though we run each month at a loss, but realistically we pay £1000 per month rent, all rates, bills, credit card payments etc and still live comfortably often with a little bit of disposable income and saving without any child or working tax credits etc

on an affordability assessment we are very high risk at 80%.

Please can someone advise if there are any ways around the affordability assessment, or if any lenders out there would consider what is in and out of our bank account rather than what is declared to the tax man?

Browntoa

Approach a specialist mortgage broker

Bluebirdman_of_Alcathays

What is declared to the tax man has a semblance of reality and control - an accountant is very unlikely to knowingly misrepresent the truth. What you choose to put in and out of your bank account has no control whatsoever.


Sorry if that's harsh - but I'm struggling to see why on earth you think a lender should only take into consideration your turnover and disregard your expenses?!

Guest101

hanabana wrote: »

Please help, currently stuck between a rock and a hard place and no longer know where to turn! apologies for a long post!

I am currently in a rental property, family of 4 and been renting here 10 years, all rent paid on time, no issues etc until January last year when our old Letting agency (small local family run business) retired and sold their portfolio onto a massive Letting agency who have increased rents - Your LL increases rents. Have you spoken to him or her? charged fees for this that - whats this and that? and the other, not only upsetting us as tenants but now the landlord. - well the landlord should terminate his agreement then.... so much so our landlord is no longer renting our property out (even privately with no agency involvement as we have tried this option) From November 2017. - Have you been given notice? so basically by November we need somewhere else to live. ideally sooner. - well you want to, you don't NEED to, as that doesn't end a tenancy. Only you or a court does that.

so we want to buy; - excellent
we can't afford a full mortgage as we would require a 3 bed house and in Surrey - well then you need to rent.
we have 15-20k available for a deposit - what about loans and credit?
we looked at shared ownership and have properties available to us if we can pass the affordability assessment - excellent.

all looks great you think?
then you put all the financials on paper. - well this perhaps means a reassessment of either (or both) where you live and what you earn.
I am self employed and have been for 8 years - doing? , my accounts are all done correctly and i have an accountant but for my industry there are a lot of ofset expenses meaning that although i get paid in excess of £2K every month - That's not huge sum of money for self employed. You could earn that fairly easily in FT employment. If I went self employed I could earn a minimum of £5,000 and im not exactly sought after my tax return is for less than 50% of this. if going on basic figures of tax return and wage slips then credit cards and a car finance it actually looks as though we run each month at a loss - So what will you do to rectify? , but realistically we pay £1000 per month rent, all rates, bills, credit card payments etc and still live comfortably - well if you have savings and you have debts, you will no doubt be losing money, so why not pay those off now? often with a little bit of disposable income and saving without any child or working tax credits etc - why aren't you claiming either of these??

on an affordability assessment we are very high risk at 80%.

Please can someone advise if there are any ways around the affordability assessment, or if any lenders out there would consider what is in and out of our bank account rather than what is declared to the tax man?

What you're suggesting doesn't make sense.


You Declare your full income and then declare allowable expenses. If you aren't declaring this then you aren't fulfilling your obligations

hanabana

Browntoa wrote: »

Approach a specialist mortgage broker

thanks for a quick reply browntoa, sorry to sound thick but a specialist in what field? self employment?
we have had a mortgage agreed in principal with a specialist mortgage advisor recommended through my work of around £180k but the house prices here are in excess of £325k. this i why i have looked at shared ownership and although we could easily afford the mortgage and rental payments, the local authority affordability assessment for the "shared" side is saying don't tough us with a barge pole!

i need to be able to find a loophole or a way to prove to them how we live financially i think

Guest101

hanabana wrote: »

thanks for a quick reply browntoa, sorry to sound thick but a specialist in what field? self employment?
we have had a mortgage agreed in principal with a specialist mortgage advisor recommended through my work of around £180k but the house prices here are in excess of £325k. this i why i have looked at shared ownership and although we could easily afford the mortgage and rental payments, the local authority affordability assessment for the "shared" side is saying don't tough us with a barge pole!

i need to be able to find a loophole or a way to prove to them how we live financially i think

What work? Your self employed?? (or are you?)

Tammykitty

If your tax return is showing less than £12k a year, why are you you not claiming any tax credits etc - you are probably entitled - unless your partner has income too?


the profit on paper (Tax Return) and actual profit can differ significantly - especially if a large proportion of the expenses is mileage


Make sure you aren't double counting the expenses for this, if you are putting 45p a mile through your accounts
Don't be including full car related expenses in your other outgoings for affordability (just include costs not covered by the amount in the business accounts)

Pixie5740

There isn't a loophole unless you've got a time machine to go back to 2007 where you could have possibly have had a self cert mortgage.

Just because you think you can comfortably afford mortgage payments doesn't mean that mortgage lenders will agree with you. Comparing rent payments to mortgage payments is like comparing apples with oranges because there is more to home ownership than just paying the mortgage. Due to the MMR which came into effect April 2014, mortgage lenders need to be confident that you will be able to afford the mortgage should interest rates rise to circa 7% and not just when interest rates are at an all-time low.

hanabana

the renting situation is a very complicated one that we are finally at the end of. the letting agents changed terms of the contract for both parties and rent was increased, new contracts were arranged which we were charged for as we had been given a section 21 notice but arranged with the landlord that they would retract that and give us a maximum of 12 months at increased rent before taking off the market completely, so yes we do have to move.

i also know renting another property is an option but would like some security which is why i would like to buy.

i am self employed as a registered childminder. i have a childminding accountant and because i work from home and work 60+ hours per week percentages of household bills etc are ofset including wear and tear. i would have to pay the rent and council tax etc regardless of what job i was doing so this is more of a perk really.
credit cards are old debt that with this forum have been moved between credit cards. i continue to save rather than pay off as they aren't acruing interest currently and saving goes towards the deposit

with my husbands wage we aren't entitled to child and working tax credits.

i don't know what we can do to rectify looking as though we run our household at a loose when i know we aren't which is why i asked for help!

Pixie5740

I don't really understand why you think lenders should take your £2k a month income into account when calculating affordability when £1k of that money has to be paid out in expenses.

AdrianC

hanabana wrote: »

I am self employed and have been for 8 years, my accounts are all done correctly and i have an accountant but for my industry there are a lot of ofset expenses meaning that although i get paid in excess of £2K every month my tax return is for less than 50% of this. if going on basic figures of tax return and wage slips then credit cards and a car finance it actually looks as though we run each month at a loss, but realistically we pay £1000 per month rent, all rates, bills, credit card payments etc and still live comfortably often with a little bit of disposable income and saving without any child or working tax credits etc

Sounds as if your accounts aren't accurate, then.

Your turnover - the amount you receive before expenses - is irrelevant.

Your income is the figure after all business expenses. If this shows on your accounts as £1k/mo, but you're actually spending a lot more on your lives rather than your business, then it sounds as if your personal expenses are being put through the business books to make your income look artificially low, so that you pay less income tax.

£2,000/mo turnover.
£500/mo business expenses.
= £1,500 personal income - taxable as income.

£2,000/mo turnover.
£500/mo business expenses.
£500/mo [STRIKE]personal[/STRIKE] business expenses (honest, guv).
= £1,000 personal income - taxable as income.

Even ignoring the illegality of that second situation, this is the natural outcome of it. You show low income on paper, you are seen as having low income. This is a surprise?