I earn £18,000 from my job + self employed. Can I buy a home?

KeiraW

Hey there,

I’m new here so apologies if something like this has already been answered. I just really need help, advice, tips!

I’m a single 32 year old and earn £18,000 annually from my employed job. I’ve not long set up my own creative freelance business too and although it’s only really my 2nd year trading I’m earning roughly £6,000 from my self employment (AFTER expenses). I live in Wolverhampton and I’m looking for new build properties around the tettenhall, perton, Codsall, and even Staffordshire areas.

I’m not looking for anything too crazy big. A quaint 2-3 bedroom place preferably NOT an apartment. I have a deposit saved up and also have a help to buy isa that I’m regularly putting money into.

Am I being realistic here? Can I buy a property as a singleton on what’s apparently classed as a “low income”

I’ve not had any mortgage advice from anyone yet as I wasn’t sure if they’d see past the figures and actually assess my affordability. If I can put away £800-£1000 a month in savings, surly I can afford a property?

Sorry if I’m sounding naive here.

Keira

00ec25

you can get a basic idea of what you can afford by using any of the many online mortgage borrowing calculators - try some?

you have not said how much those properties cost so we cannot say if you can afford them or not.

most lenders will require 2 - 3 years of accounts/tax returns before they will even consider any self employed income as part of your available earnings as you have no history to show your sustainable income

so after tax on your 18k salary you are left with around £1,290 per month take home. How much have you set aside for tax on your 6k self employed or have you included tax in your "after expenses"? At best you'll lose at least £1,300 in tax and NI on that 6k so 4,700 left or an extra 390 per month

so your total post tax income is around 1680 per month of which you say you do not spend ("can save") 60% of it?

KeiraW

I should maybe add, with my self employment, it’s part time for now while I build up the business. I earned nothing in my first year due to start up costs being more than anything I earned (which is very common) so to earn £6000 profit in my 2nd year was quite an achievement. My projected annual income for the tax year 2018-2019 is roughly £9,000 after expenses.

KeiraW

I am looking at properties around £140,000-160,000 in and around my area.

To give you an example of new build property prices in my area, a new build, 4 bedroom with barratt homes or persimmons is roughly £239,000.

00ec25

KeiraW wrote: »

I am looking at properties around £140,000-160,000 in and around my area.

To give you an example of new build property prices in my area, a new build, 4 bedroom with barratt homes or persimmons is roughly £239,000.

sorry but you are totally unrealistic. Use post tax figure, not projected income. Also are you aware that once your tax liability is >£1,00 (ie 10k of profit) you enter payment on account territory so will need to pay half of the current years tax on top of all the previous year's tax ?

you have not said how much deposit you have available but at 140k the minimum 5% would need £7,000 leaving you needing to borrow 133k. You won't be able to get that much even if your 9k self employed is included despite its lack of history

https://www.moneysavingexpert.com/mortgages/how-much-mortgage-borrowing

KeiraW

00ec25 wrote: »

sorry but you are totally unrealistic. Use post tax figure, not projected income. Also are you aware that once your tax liability is >£1,00 (ie 10k of profit) you enter payment on account territory so will need to pay half of the current years tax on top of all the previous year's tax ?

you have not said how much deposit you have available but at 140k the minimum 5% would need £7,000 leaving you needing to borrow 133k. You won't be able to get that much even if your 9k self employed is included despite its lack of history

Yes I’m aware of the 11K threshold with self employment income and with £16,000 already saved up for a deposit I’m pretty sure I can borrow a fair amount for a 2 bedroom property.

THANKS for the encouragement (not) I was hoping that the MSE forum would have given some advice, tips, encouragement etc (as stated in my original post) on what the next move should be to better my chances, not to basically cr*p on my hopes, goals. I didn't disclose ALL of my details because I'm a private non boasting person. I understand the more information I give the better to help advise. My business is doing well, the projected income is from confirmed contracts so realistically, I was under-predicting my goals as I'm expecting later contracts to come in. YES I'm fully aware I have to pay half of next years tax, I'm also aware that I can now do this on a monthly basis rather than bulk payments.

kingstreet

£24k a year with no credit, dependents, ground rent/service charges etc will see a mortgage of c£108,000 seen as affordable. Typically it's 4.5 x income.

A lender will typically want to average your latest two years' self-employed earnings. They don't just take the latest year's.

Typically you'll need at least 15% deposit for a newbuild. Less on HTB but as the future cost of the equity loan will reduce what you can borrow, you win on the swings, lose on the roundabouts.

Speaking to an independent mortgage broker will enable you to understand timescales and limitations.

jimbo747

KeiraW wrote: »

Yes I’m aware of the 11K threshold with self employment income and with £16,000 already saved up for a deposit I’m pretty sure I can borrow a fair amount for a 2 bedroom property.

THANKS for the encouragement (not) I was hoping that the MSE forum would have given some advice, tips, encouragement etc (as stated in my original post) on what the next move should be to better my chances, not to basically cr*p on my hopes, goals. I didn't disclose ALL of my details because I'm a private non boasting person. I understand the more information I give the better to help advise. My business is doing well, the projected income is from confirmed contracts so realistically, I was under-predicting my goals as I'm expecting later contracts to come in. YES I'm fully aware I have to pay half of next years tax, I'm also aware that I can now do this on a monthly basis rather than bulk payments.

Speak to a independent mortgage adviser first to find out what you can realistically borrow. No point looking at £130k+ homes if you can only currently borrow £60k. Good luck.

edit - too slow typing, as #7 above

Cheeky_Monkey

KeiraW wrote: »

Yes I’m aware of the 11K threshold with self employment income and with £16,000 already saved up for a deposit I’m pretty sure I can borrow a fair amount for a 2 bedroom property.

THANKS for the encouragement (not) I was hoping that the MSE forum would have given some advice, tips, encouragement etc (as stated in my original post) on what the next move should be to better my chances, not to basically cr*p on my hopes, goals. I didn't disclose ALL of my details because I'm a private non boasting person. I understand the more information I give the better to help advise. My business is doing well, the projected income is from confirmed contracts so realistically, I was under-predicting my goals as I'm expecting later contracts to come in. YES I'm fully aware I have to pay half of next years tax, I'm also aware that I can now do this on a monthly basis rather than bulk payments.

And yet you chose to withhold the relevant information from your opening post making it virtually impossible for anyone to give you meaningful advice.

If you are that 'private' maybe it's not the best idea to post on a public forum. People who are boastful tend to have something to boast about.