mortgage application and additional income question

alabama1985

Hi,

I’m after some advice.

My husband and I are hoping to get a mortgage at the start of next year. We both work, him 9-5 mon- fri, and myself part time, however over the past 2 years my husband has been running an events business in his spare time (nights, weekends etc), he will have 2 years’ worth of accounts shortly but the profit has differed both years, and is likely to do so next year and so on. My question is how when they are looking at our income will they work out his self employed amount? Our salaries are fixed but the self employemt obviously is variable, but how much they take into account could massively effect how much we can borrow. I know not all lenders will consider 2 years of self-employment accounts, but we’re going through a broker who was sure he could find some who would (we are likely to have to go through specialist lenders due to some historic defaults)
Any info would be great, thanks!

Rick_Albright

This should not be a problem, given he has income from full-time job.

MortgageMamma

There are lenders available that will look only at your most recent accounts if that is more favourable for you in terms of affordability

There are lenders that will average self employed income over 2 or 3 years accounts if this is better

Your broker should have given you an indication on which type of income assessment he/she was going to look for/recommend.

You can also have child benefit, child tax credit and other income added with different lenders.

Do you have an accountant? is your husband a sole trader or a Ltd Company?

Edit. Historic defaults don't always have an impact on which mortgage product you can get. There are a lot of factors to be taken into account including what type of account defaulted/ccj'd. How long ago it was. Whether it was satisfied or not. There are lenders who do not penalise for communications defaults for example. And lenders who will overlook historic arrears on unsecured credit.

alabama1985

thank you!

yes he has an accountant, who I assume when requested will provide the paperwork to prove the extra income etc, but I was just curious how mortgage lenders take it into consideration, it's not a massive amount that he made each year, but it could help when assessing what 'spare' cash we have at the end of the month after bills, at the moment any profit from the extra income has been going into savings towards the deposit, therefore if we get the mortgage it will be 'spare' money to help with payments etc. So will the lender look at the fact that it's been going towards savings?

We are at the very early stages of everything and so just trying to get my head around everything and stop myself worrying.

We have around 10k credit card debt too which is worrying me- however all payments are made on time and according to equifax we haven't had any arrears in 40 months (we've learnt from our mistakes!) but unfortunately still paying things off. Is it possible to get a mortgage with credit card debt such as this?

thanks again,

MortgageMamma

alabama1985 wrote: »

thank you!

yes he has an accountant, who I assume when requested will provide the paperwork to prove the extra income etc, but I was just curious how mortgage lenders take it into consideration, it's not a massive amount that he made each year, but it could help when assessing what 'spare' cash we have at the end of the month after bills, at the moment any profit from the extra income has been going into savings towards the deposit, therefore if we get the mortgage it will be 'spare' money to help with payments etc. So will the lender look at the fact that it's been going towards savings?

We are at the very early stages of everything and so just trying to get my head around everything and stop myself worrying.

We have around 10k credit card debt too which is worrying me- however all payments are made on time and according to equifax we haven't had any arrears in 40 months (we've learnt from our mistakes!) but unfortunately still paying things off. Is it possible to get a mortgage with credit card debt such as this?

thanks again,

Hi

Its good you are planning well in advance of getting your mortgage. Any lender would be pleased to see your surplus income building up in a savings account so that is not an issue. Nor is the amount of additional income. It all counts and some lenders will accept 100% of additional income/second jobs if there is proven history of the work/earnings.

Regarding your credit blips. Do not worry, there are plenty of lenders who will overlook unsecured arrears over two years ago.

Regarding your credit card debt. Yes you can still get a mortgage with that debt but it will affect your affordability.

The best thing you could do now is have a preliminary chat with a mortgage adviser, let them look at the full picture of your situation and do a mortgage affordability calculation. This will help you ascertain what you could realistically afford to borrow. Get the calculation done including and excluding the credit card debt so you can work out if its worth paying that debt off before taking a mortgage. Also get estimated monthly payments for your maximum lending figure and sit down and do a budget to see if you could realistically sustain those mortgage payments in the long term.

Its also important to think about insurance and have a chat around that. By insurance I mean income protection and some life assurance to cover the mortgage balance should one of you die. You also need to factor in an additional sum if you have dependent children.

Its rather a lot to take in so the process of advice is usually handled over several meetings or phone calls, together with emails.

Now it the time to get a proper plan together so you can work towards raising that deposit, and getting your bank statements showing as much disposable income as possible.

MM