Mortgage success story - SELF EMPLOYED

Rick_Albright

Good afternoon all, I am new to these forums. I look forward to being part of the furniture all in good time.

I wanted to share my mortgage success story with you who are self employed.
I managed to obtain an mortgage with HSBC, I was a 100% shareholder/owner of a business however due to the complex structure of the company it never made a profit for tax reasons, I worried this would be my barrier to obtaining an mortgage. as I did not want to go down the self employed route knowing I have £0.00 profits knowing no mortgage company would touch me.

I wanted to borrow £479,000 with a 25%/35% deposit.

Anybody who is self employed this will appeal to and I hope it can help, I simply transferred all the shareholding to my mother in law who guaranteed in front of a solicitor when mortgage was live, I would receive the full shareholding for a fee of £0.00. I kept my Directorship but legally my shareholding was reduced to 7.9% shareholding. ***Temporarily I may add***

I simply put myself on PAYE for 12 months got all the payslips paid allot of tax, told the mortgage adviser what I was doing truthfully and transferring the shareholding she kept referring to me as a manager of a business and said it was perfectly fine and a few weeks later I received a letter with the full offer to provide the mortgage required.

I have provided a break down if it helps.

1. 12 - 8 months payslips of being employed.
2. Find someone who will sign an contract for shareholding transfer then reverse after a certain date or time.
3. Stay on as a Director/ remove yourself - providing shareholding is kept below 10% you will be classed as employed I believe rather than self employed.

This was nearly 4 years ago now. I have since paid a large portion of the mortgage off and being nearly mortgage free (remaining £55,000) and now I am on the property ladder successfully owning a home. :money: I hope to pay the last of it of this year.

I hope this story benefits others who really struggle being self employed I really hope this helps knowing how frustrating it is - The employee can obtain the mortgage very easily compared to the owner but I always question if a company hits hard time it will be the employee to go before the owner so the system is flawed I feel.

I used a solicitor and accountant who helped me achieve this. I believe I obtained the mortgage as I hit there criteria and they could not say no to me. Apparently also now underwriters are in branch and is it inform of the mortgage adviser/ manager.

P.S Of course there is more to it than this, they credit searched me/ agreement in principle etc but this goes without saying!

dunstonh

Any reason why the retained profits could not be used? That may well have saved all that work. Not all lenders accept retained profits but some do.

Rick_Albright

I wanted to keep it simple so opted for an easier route.
As all profits were paid to me in form of a salary to get away from the 20% corporation tax in the early days since then things I have changed and after getting a house I now take dividends and profits etc it may been more expensive but it helped me obtain the house.

I am just sharing my story to try and help those who believe there is no hope for them :money:

kingstreet

I have to say, I would personally not accept a client who embarked on such a plan to obtain a mortgage.

Rick_Albright

I think the reason why it worked was I was honest with the mortgage adviser/manager and explained exactly what I was doing this is when she kept referring to me as a manager.

Also the end result was successful and the mortgage monies should be paid back in full this year or start of next.

I don't know if the size of the deposit helped etc.

sal_III

Did you run this by HMRC? They don't take kindly to people transferring company shares for £0 even to family members other than spouse, and then getting them back.

If you had the income declared, your SA302 should have been much easier proof of income, ignoring the company.

Don't want to bash your efforts or anything but as a ltd. Director myself I don't agree your method is the best and certainly not the easiest way of obtaining a mortgage as a sole trader or ltd. contractor or small business owner.

Rick_Albright

No offence taken.

Yes as the company shares were worth £0.00 because it had no profits.
The accountant even requested an letter from HMRC they kindly obliged.

amnblog

I'm with Kingstreet.

No way I would touch such a case.

If HSBC were aware of the full facts and history I would be amazed.

sal_III

Rick_Albright wrote: »

No offence taken.

Yes as the company shares were worth £0.00 because it had no profits.
The accountant even requested an letter from HMRC they kindly obliged.

Just because a company has no profit, doesn't mean its shares are worth £0. Just look at all the large multinationals...

I'm curious how did you pay yourself before you switched to PAYE? I hope it wasn't one of the notorious schemes.

Rick_Albright

I paid myself below the tax and national insurance threshold in preparation.

Rick_Albright

I told them all the facts HSBC.
The lady was what they call stage 3 underwriter.