Self employed Mortgage question

TwoYearToMove

I'm going to spend the next few years getting a deposit together for a mortgage. I'm self employed, and I'm a self-published fiction author. Currently I rent.

So my question is, are there any pitfalls or anything else I should be aware of going for a self employed mortgage, and is there anything in particular regarding being a self published author that might cause issues with mortgage lenders.

As well as that, I'm thinking about possible buying a property with a shop, to turn into a bookshop. Would that affect me going for a mortgage? I.e. it would be better to just go for a mortgage on a residential property to start off with?

ACG

Your occupation is not an issue in the main, most lenders will average out your last 2 years incomes.

The mixed use property would limit your options significantly.

TwoYearToMove

ACG wrote: »

Your occupation is not an issue in the main, most lenders will average out your last 2 years incomes.

The mixed use property would limit your options significantly.

Are there lenders that would only take 1 years incomes into consideration? And why would the mix use property limit anything? If I went the shop route then I would be living in the area above the shop, and the shop probably wouldn't be up and running for some months after I move in.

csgohan4

TwoYearToMove wrote: »

Are there lenders that would only take 1 years incomes into consideration? And why would the mix use property limit anything? If I went the shop route then I would be living in the area above the shop, and the shop probably wouldn't be up and running for some months after I move in.

it would be a specialist niche lender potentially, may even need a commercial mortgage as you plan to use for commercial purposes

1 years accounts depending on the amounts may limit your options.

See a broker to look at your individual options

ACG

There are a handful of lenders who will work off latest years figures, but that will probably mean higher rates.

As for the property mix, it is an FCA rule, I always get it mixed up as to whether 40% or 60% needs to be for residential use. If you have a shop/flat, then realistically it is either going to be the same size or the downstairs (shop) would be bigger.

Lenders do not like to secure their money against mixed use properties, if it is empty - is it a sign that the area is on a downward trend? What will move in? (most do not like certain types of businesses), what will move in to the shops next door (assuming it is a row of shops/flats). So many questions and much more risk to the lender.

You are wanting to combine residential and commercial property on residential rates - which are lower than commercial.

[Deleted User]

At least 40% has to be used for residential purposes to be a residential mortgage.

Commercial Lending and Residential Lending are a completely different propositions. You would think that they are both giving you money to secure a property but its a different market. As far as I know there are no residential mortgage companies working in commercial lending. When you get a mixed use property you put yourself in the middle of a venn diagram where the circles barely overlap.

I only refer to another company for commercial but based on the last couple of referrals i have made, unless the business is currently trading and has consistent books to show the profit of the company it is pretty difficult to raise the finance.

Maybe a commercial broker is lurking here and can shed light on the underwriting process

TwoYearToMove

Thanks for all the advice everyone. It looks as if it's better to just go for a residential mortgage, and then think about the shop situation afterwards. I would also be a first time buyer.

Regarding the shop/flat above type of purchase. I just presumed it was no different from getting a 'normal' mortgage, and then I could slowly get into using/fitting the shop out on the ground floor over time, but it would seem it complicates the getting of the mortgage, and seeing the most important thing for me in 2 years from now is to get a mortgage, then probably better to just concentrate on getting a roof over my head first

TwoYearToMove

Follow up question regarding the comments above about a residential mortgage has to be at least 40% for a residential space.

Ideally I would buy a place, where I would get all the upper floors, say 2 of them, which I presume would be 2/3rds of the overall square footage. In that situation would I then be able to get a residential mortgage because the living space would be a lot more than the commercial space? What I'm saying is can you get a place with a shop on the ground floor under a residential mortgage, or it has to be a different kind of mortgage no matter what? I should also add that I won't be 'buying' the business of whatever the shop used to be, I'll be replacing whatever was there with my own, which would be a bookshop.

ACG

The FCA rules are 40% residential as a minimum.
The lenders rules may (and typically are) different and most will want 100% to be residential.

Even if 99% was residential, many lenders would still not lend on the property as they do not want the hassle involved with commercial lending.

TwoYearToMove

ACG wrote: »

The FCA rules are 40% residential as a minimum.
The lenders rules may (and typically are) different and most will want 100% to be residential.

Even if 99% was residential, many lenders would still not lend on the property as they do not want the hassle involved with commercial lending.

I understand the rules are the rules, but I fail to see what you do with your property, i.e. whether a part of it is a shop or not has to do with the lender? Aren't they just judging whether what you loan is in the actual bricks and mortar building as apposed to what you're doing inside it?

Also if I got a place, the shop would just be an empty unused space for a while, at that point, the point at which I move in, I wouldn't have a 'business' in that shop, it would just be an empty space, so I don't understand how a lender would even judge that to be a shop.

There's a lot I'm unclear on

[Deleted User]

TwoYearToMove wrote: »

I understand the rules are the rules, but I fail to see what you do with your property, i.e. whether a part of it is a shop or not has to do with the lender? Aren't they just judging whether what you loan is in the actual bricks and mortar building as apposed to what you're doing inside it?

Also if I got a place, the shop would just be an empty unused space for a while, at that point, the point at which I move in, I wouldn't have a 'business' in that shop, it would just be an empty space, so I don't understand how a lender would even judge that to be a shop.

There's a lot I'm unclear on

There are a lot of regulatory reasons for the split in ocmmercial/residential but from a pure business point of view pretty much every decision a lender makes is based on the question:

'If this person doesnt pay their mortgage and we have to reposess the property can we sell it quickly and get back our money?'

A property that is also a currently trading business would put off a very large part of the purchase market so it presents a bigger risk than the lender is willing to take on


I have seen it a lot with equestrian properties as I get a lot down where I am. Some are worried too much land with a property will give someone the opportunity to turn it in to a stables/equestrian business and it limits the number of people who would buy it when it is sold later.