Mortgage eligibility for a Freelancer / Self-employed: based on NET or GROSS income?

heidiann

Hi,

I'm self-employed, (trading as a Limited Company, 100% shareholder/director - not sure if any of this matters) and I want to apply for a mortgage this year.

Would my mortgage eligibility be based on my NET or GROSS income?

I've been told it's different if you employ yourself.

Thanks in advance for your help!

[Deleted User]

What type of work is it? IT Contractor?

ACG

Generally speaking it would be Gross annual income - before tax but after expenses.

heidiann

Deleted_User wrote: »

What type of work is it? IT Contractor?

Graphic / Web design. Does that matter?

kingstreet

Lenders typically take your director's remuneration and dividends from your SA302s; or your director's remuneration and share of post-tax net profit from the company accounts.

Some lenders take latest year's figures, others take an average if the latest year is higher than the previous one.

If you do have a daily contract rate, some lenders will work from this.

csgohan4

I can't stress the importance of getting the right broker who can give you a selection of lenders from fast offer to slow but may take ages.


They will chose the right lender for you depending on what company accounts and SA302's you have

[Deleted User]

Repeating previous comments but generally there are enough lenders in our industry to have them view it all differently.

Some will work from daily rate x 48 weeks if there is a daily rate
others will work from salary and dividends since you are in a ltd company
Some take salary plus share of net profit after tax.
A couple of outliers take salary plus net profit before corporation tax

Ask around colleagues or similar types of works and get a recommendation for a broker and sit down and see what you want to do. The lenders that do things differently tend to be a bit slower and heavier on paperwork. Maybe you can get away with doing it the easy way if the figures allow.

Advice isnt always the cheapest rate, it might be you value your mental health more than the stress of dealing with a horrific lender who will save you a few pounds a month (although thats what you pay a broker for I guess). By going through priorities and requirements you will get a clear idea of where you stand or what direction you need to head towards.

Hungary971

Btw you are an employee or director not self employed.

If you call yourself that you are an HMRC enquiry waiting to happen

amnblog

Hungary971 wrote: »

Btw you are an employee or director not self employed.

If you call yourself that you are an HMRC enquiry waiting to happen

Not as far as a mortgage lender is concerned.

sal_III

Deleted_User wrote: »

Some will work from daily rate x 48 weeks if there is a daily rate

You missed a multiplier there, can't remember the exact formula, it has always been roughly day rate x 1000 in my mind. It's all assuming outside IR35 if you are a contractor.

Speak to a broker, there are several who specialise in such Mortgages and know all the right Lenders.

[Deleted User]

sal_III wrote: »

You missed a multiplier there, can't remember the exact formula, it has always been roughly day rate x 1000 in my mind. It's all assuming outside IR35 if you are a contractor.

Speak to a broker, there are several who specialise in such Mortgages and know all the right Lenders.

Daily rate x 1000 is crazy high. A day rate of £400 would put a mortgage of nearly £2million available with this calculation.

Day rate x 5 days a week x number of weeks the lender uses (usually 46 but sometimes a bit higher or lower) is a much more standard calculation