Self employed mortgage advice

LordD

Hello - I want some additional borrowing on my mortgage - my bank say now they only look at Net Profit before Tax values, not the Gross value. Naturally the Net has all the dis-allowables not taken into account, so is significantly lower.

My question is is this standard behaviour for all banks?
To me, it seems like another punch to the stomach for the self employed.

Many Thanks

boo_star

I!!!8217;m not sure why it would be an issue.

One way or another they!!!8217;re going to want to ensure that you can afford the mortgage, and even if your Net is lower because of things that can!!!8217;t be !!!8220;written off!!!8221; for tax purposes, a PAYE employee would have those taken into account for their affordability checks too.

Unless I!!!8217;ve got the wrong end of the stick here.

amnblog

You do not earn the gross figure. You have costs which leave you the net pre tax figure.

That is understandably what lenders consider.

Why would they lend and include outgoings (business costs)?

ACG

Say you earn £100,000 but your costs come to £90,000.
Why would they take the £100,000 figure as your income? If they lent you £400,000 (4x income) when your actual income is £40k, you are going to struggle to pay the mortgage let alone your other bills and feed yourself.

I realise your expenses are unlikely to be 90% of your turnover, but I wanted to use an extreme.

jungle_jane

They go off the figure on your SA302. It's one of the problems of being self employed...on the one hand you want to pay a small amount of tax but that bites you later when you want a mortgage and need high earnings.