New Homeowner - Director of Ltd Company

Potbellypig

Hi - let me start by telling you my situation. I started a new job as a contractor using an umbrella company in April 2015 in which the turnover was £35k. I then created my own Ltd company in April 2016 and the turnover for last tax year was £44k. I only pay myself minimum wage and will have some dividends coming through but this will be completed by the accountant shortly and I'm not sure exactly how much, but it wouldn't be enough to make any difference. I've never owned a property before and they are building some new houses by me in which me and my partner are looking at going down the help to buy equity loan route. My partner only earns £11k a year.

The 2 different plots that we are looking at are valued at £215k and £242k and I have the deposit for each of these while also using the help to buy equity loan.

I have a meeting with the housing company in a few weeks time but I'm wondering what are my chances of getting anything close to like the £215k and £242k houses? Would a normal mortgage broker be able to help? A colleague of mine suggested a broker that specialises in contractor mortgages but I'm a bit weary of this. He thinks that they would be able to get me a mortgage of 5.5 times my yearly contract. Is this just pie in the sky stuff? Also, in terms of the help to buy equity loan - I assume that they also do an income and expenditure? Or is this part of what the mortgage company do?

I know that I can afford it, but I'm aware that there are certain difficulties when being self employed and trying to get a mortgage.

Any help would be greatly appreciated.

Lilla_D

Hi, up until late last year I used to work for one of the contractor specialist brokers, so can answer your questions.

Assuming that you have continuous contracting history (I mean no long breaks between contracts), your income may be assessed based on your contract rate rather than your 1yr Ltd company accounts.
Some lenders work out your annual income as if you worked 46 weeks, while others assume 48 weeks. (Ok, there's also a lender using 52 weeks, but then they take some of it off during their affordability test) However, some of the lenders have minimum income requirements for this assessment, which you wouldn't pass with a turnover of £44k.

Anyway, assuming a joint income of roughly £50k, no huge credit commitments and not too bad credit history, you don't need 5.5 times income multiplier to get the required mortgage

When you get approved for the Help to Buy loan, you have to indicate your earnings, but the Help to Buy agents don't normally ask for proof, as they know that the mortgage lender will do that due diligence anyway. Consequently, when you apply for the Help to Buy loan, you can just state your contract income. If necessary, the broker can supply an AIP.

Net, based on the details mentioned in your post, your case sounds pretty straightforward to me. Please note the assumptions I made above re your credit situation, but if that's all good, then you should be good to go

Potbellypig

Lilla_D wrote: »

Hi, up until late last year I used to work for one of the contractor specialist brokers, so can answer your questions.

Assuming that you have continuous contracting history (I mean no long breaks between contracts), your income may be assessed based on your contract rate rather than your 1yr Ltd company accounts.
Some lenders work out your annual income as if you worked 46 weeks, while others assume 48 weeks. (Ok, there's also a lender using 52 weeks, but then they take some of it off during their affordability test) However, some of the lenders have minimum income requirements for this assessment, which you wouldn't pass with a turnover of £44k.

Anyway, assuming a joint income of roughly £50k, no huge credit commitments and not too bad credit history, you don't need 5.5 times income multiplier to get the required mortgage

When you get approved for the Help to Buy loan, you have to indicate your earnings, but the Help to Buy agents don't normally ask for proof, as they know that the mortgage lender will do that due diligence anyway. Consequently, when you apply for the Help to Buy loan, you can just state your contract income. If necessary, the broker can supply an AIP.

Net, based on the details mentioned in your post, your case sounds pretty straightforward to me. Please note the assumptions I made above re your credit situation, but if that's all good, then you should be good to go

Thanks, that's great help. I was previously bankrupt but that's all off the credit file now as it's been over 7 years. We only have unsecured debt of £3k between us.

Lilla_D

The good news is that it could still be done