Self employed partner - mortgage advice

Ozzuk

Before I talk to my mortgage provider I need to better understand the impact of someone being self-employed and anything we can do to mitigate the situation hence me posting for advice

Background, we're looking to move house, aiming to spend around 230-300k, optimum 250k. My GF lives with me (my house, mortgaged), last 3 years but has been retraining. GF went sole trader June 2017, but very low income and has only started picking up last couple of months. GF will be doing 2017 tax return shortly. GF now has good income, 4 revenue streams, fixed term contract for 2 days a week (18mnth contract) with other work coming in some invoiced, some cash, private clients etc but aside from the fixed term role it is all ad-hoc (but regular). We are both early 40s (just in case relevant).

Affordability not an issue, and my salary alone will get me a 220-250k mortage so I don't actually need GF income.

But...we want to buy the new house together (so its 'ours'). adding my partner to mortgage calculators sees the offering slashed by 80k!!!

We'll be talking to providers but I'm hoping for advice what we need to do to prove her income, what info she will need to provide so we are better prepared. Also...if there is any way of buying house on my salary alone but somehow both named on mortgage?

No need to mention about splitting up risk, thats covered.

Slinky

Just because people pay her in 'cash' doesn't mean it can't/shouldn't go through her books. She can't use undeclared/untaxed cash earnings to boost her profits in the eyes of a mortgage provider.

butterflybook

You may want to employ a broker to find a lender that will not class her as a dependant of yours.

Alternatively it may be that you may need to buy in your sole name and add your girlfriend on at a later date.

Although a good broker should be able to find an appropriate lender for you.

Thrugelmir

Ozzuk wrote: »

But...we want to buy the new house together (so its 'ours'). adding my partner to mortgage calculators sees the offering slashed by 80k!!!

You would be financially supporting her is she's on a low income.

fixed term contract for 2 days a week (18mnth contract) with other work coming in some invoiced, some cash, private clients etc but aside from the fixed term role it is all ad-hoc (but regular).

If it's not officially declared as income. Then there's no evidence to support the declaration.

Ozzuk

Sorry just to add, she will declare cash as income, however whereas the HRMC won't complain (as its taxable) a mortgage provider won't look at it because there is no proof. I guess GF should have banked everything...but a bit late for that now.

All the income is above book, NI, tax etc. It is the number of different streams, lack of contract to rely on, and the portion of cash that I think makes her unattractive from a risk perspective...

Ozzuk

Slinky wrote: »

Just because people pay her in 'cash' doesn't mean it can't/shouldn't go through her books. She can't use undeclared/untaxed cash earnings to boost her profits in the eyes of a mortgage provider.

This is the thing...'books' just means a spreadsheet detailing income/expenditure (which does include the cash). If not backed up by invoice/reciepts then I don't think we can use it - we could put anything on there.

Thrugelmir

Ozzuk wrote: »

Sorry just to add, she will declare cash as income, however whereas the HRMC won't complain (as its taxable) a mortgage provider won't look at it because there is no proof.

To calculate tax due , accounts will need to be prepared.

How she is paid is not important. As she should be invoicing her customers for work performed. Thereafter is down to bookkeeping.

DottieDam

I'm newly self employed and we found that I can be named on everything but my income isn't included. So basically I am a dependent of my husbands in the eyes of the bank (although in reality I earn more than him thus far). It definitely didn't reduce what we could borrow by anywhere near ~£80k though. I would definitely recommend a broker who can help.

When our fixed rate runs out I will have three years of financials.

Also, for ease of accounting and future mortgage potential I would recommend your partner banks her cash payments.

Ozzuk

Thrugelmir wrote: »

To calculate tax due , accounts will need to be prepared.

How she is paid is not important. As she should be invoicing her customers for work performed. Thereafter is down to bookkeeping.

Some of the work is invoiced, but when it is seeing private clients (counselling) they pay in cash and wouldn't expect an invoice.

Seems like message is clear...need a broker!

lisyloo

a mortgage provider won't look at it because there is no proof

I find this a bit hard to believe (are you a broker? as I'm willing to be educated).
This would mean every hairdresser, beautician, person trainer (well loads of people) would not be able to get a mortgage.

Ozzuk

lisyloo wrote: »

I find this a bit hard to believe (are you a broker? as I'm willing to be educated).
This would mean every hairdresser, beautician, person trainer (well loads of people) would not be able to get a mortgage.

The T&Cs I've looked at for various providers state proveable income. Plus we can get a mortgage, just not the level we'd like. Mortgage providers (rightly so) are much more risk adverse than they used to be but it does seem to hit the self employed who are starting out.

from Santander: "be able to provide confirmation of all types of income"