Mortgage difficulties when your income is through property

Northwest54321

Does income from property have the same value when it comes to calculating affordability for a mortgage as self-employment and employment income?

I've been self employed most of my life life but 5 years ago invested in a business to build some luxury, architecturally designed holiday retreats (not merely purchasing a house for holiday lets - but building unique houses and a business around them). The business launched 5 years ago and has been much more successful than I had anticipated (occupancy over 90% for the whole year). But bizarely, I now appear to be in a situation where I am asset and income better off than I have ever been before but am told that I can't remortgage because I have 'no income'. what they mean is that on my HMRC forms (SA302) my income appears as zero from employment, zero from self-employment and with all my income coming from UK Property. Apparently income from property is not deemed to be reliable or stable and therefore not fully accepted for calculating mortgage affordability.

I am therefore trapped in a high interest mortgage without the ability to re-mortgage and shop around. I could half my interest payments if I remortgage - but am told by a broker that I can't do that unless I find a way of bringing in either employment or self-employment income.

Someone suggested moving the properties to a limited company and then drawing income from that. But is that really necessary? There is no common sense being applied to this - I have a well established business with 5 years trading history and the affordability calculators for mortgages will not accept my income as actually being an income!!!

csgohan4

can you not go customer retention products on your online portal for your lender, which needs no credit checks? or is that only for residential?

[Deleted User]

I dont understand how you built a business around these properties but have no income from self employment?
Surely if you have a business. That business will have you as a director? And then you will be drawing dividends at the least?

Otherwise if you have all these properties in your sole name and its getting done on your personal income tax, it sounds like you need a better accountant.

Mortgage wise. Retention is a good shout from above. A few BTL lenders offer these, TMW being the main one i can think of. Otherwise there are lenders that manually underwrite as specialist cases. Have you been using a broker? Precise pride themselves on being great with self employed accounts on BTL and have no minimum income requirements. Post office, Coventry, BoI have no minimum income either.

Who has been approached to turn you away so far

ACG

On his sa302 it will say income from land and property JMA.

That is where the issue is.

There will be lenders out there, but you may find it is better to stay where you are and stick to the retention products. You may need a broker to help navaigate the lenders who will and will not lend to you.

[Deleted User]

ACG wrote: »

On his sa302 it will say income from land and property JMA.

That is where the issue is.

There will be lenders out there, but you may find it is better to stay where you are and stick to the retention products. You may need a broker to help navaigate the lenders who will and will not lend to you.

Thanks for pointing that out ACG

There are definitely mainstream lenders who do BTL with all from rental income. And definitely mainstream lenders who dont need an income at all and only get docs to check what tax band you fall in to. Maybe you are being knocked out on other criteria such as portfolio rules.

Not all brokers are created equally. Some specialise in different areas. Being honest, apart from calling every lender and asking if they would do it i wouldn't know where to start with complex btl cases but that cause i do about 95% residential cases and the odd hobby landlord. Try get a recommendation from someone you know with lots of properties and see if their broker can help you.

amnblog

I cannot see the problem.

There are numerous lenders that will treat Land Property income on a tax return as self employed income. Some only from unencumbered property, others from mortgaged or unencumbered property.

Is the real issue that the L and P ‘profit’ is insufficient to support the lending required.

If not, just consult a broker experienced in this area.

Thrugelmir

Northwest54321 wrote: »

I have a well established business with 5 years trading history and the affordability calculators for mortgages will not accept my income as actually being an income!!!

In your opening post you make no mention of how the property portfolio was funded. Assuming that there's debt to be serviced (interest and possibly capital repayment) . Then the matter becomes somewhat more complex.

Another factor from the underwriters perspective is that while 90% occupancy for short term holiday letting is exceptionally good. The tenancies are only short term. Using such a high level as a base point, leaves little margin should occupancy undershoot this level for a period of time.

If the business is currently highly profitable. Channel some of your net profit into reducing your own mortgage. Ultimately creates a win win situation.