Bounce back loan towards deposit?

Natsplus

What if the BBL is not being used as a deposit, and there is a proof of it?

haras_n0sirrah

Different lenders have different criteria but from the conversations I have had trying to place cases they are seeing the bbl as a big red flag that the business is struggling. 

[Deleted User]

Bbl to a lender means that it was unable to support itself.  As self employed mortgages are based on declared earnings from 2019-2020 the lenders cna not see what impact covid has had on your business.   They are being cautious so expect a lot of questions. 

They will expect you to be able to prove that your income hasn't been impacted and you are going to earn the same as last year.  Given its only 3 months in to the new tax year, that will be very difficult to prove. 

Not all lenders are like this,  some are more flexible but they are in the minority at the moment.  Quite a few will simply decline the application without any further questions if you took any government support as Ltd or sole trader 

se2020

Does that also suggest it is necessary to pay the July tax bill at the end of the month rather than wait until the January extension as well?
(If you are SE and planning to apply for a mortgage)

haras_n0sirrah

From a brokers point of view self employed cases are a nightmare with more getting declined/ reduced loan amounts than accepted. I have had one go through with no issues- they took no government support. Trying to place one who had taken seiss I got told by 1 lender they would take seiss x 4 as long as they were back to pre covid levels otherwise wouldn't use their income at all, another said they would take 80% of the lowest tax year in the last 3 years, one I sent it to said we cant say until we have seen it but as long as bank statement activity good we will consider and then they took 3/4 of their incomes as there was little activity from mid March to early june and as both are self employed that dropped the loan by 60k. If you are self employed and do not need government support dont just take it just because if you are planning on taking a mortgage. Lenders are seeing it as a declaration that you have been adversely affected which means your tax assessments are ignored and they are basing it off your bank statements. 

ACG

Ive had a couple of conversations today not specifically about this, but one of the comments made by all 3 lenders I spoke to was "the BBL can not be used towards the deposit". 

Likewise if you took out a £20k loan and the there is now not £20k in the bank account, the lender would have concerns about the viability of the business. 

se2020

ACG said:

Ive had a couple of conversations today not specifically about this, but one of the comments made by all 3 lenders I spoke to was "the BBL can not be used towards the deposit". 

Likewise if you took out a £20k loan and the there is now not £20k in the bank account, the lender would have concerns about the viability of the business. 

I was thinking more of using savings I would have held back for running costs, so I would be increasing my deposit and then using the loan for other stuff.

blue_max_3

I think one of the terms of the loan is that you can't use it for personal use. I presume you have a business bank account? And I trust the loan would be paid into that. If a limited company, there would be tax implications for withdrawing it as cash.
If you were having to put your personal money into the company, it does suggest it is effectively running at a loss.
It is probably not a good idea to put all your money into a mortgage and then run your business into the ground.

se2020

Self employed not limited. 
I would not be running the business into the ground, it just looks like I could borrow 50k at a cheaper rate than a mortgage. 
I would use the actual loan for business and use my personal money for the house but, as self employed it is one and the same anyway.

se2020

To be clear, say I currently have 100k in my bank account. 
If I was buying a house I would put 50k down as a deposit and keep 50k back for running the rest of my life.
If I borrowed 50k from the bbl I would then put 100k down on the house and still have 50k in the bank. 
In some ways I would be better off by putting 100k down, higher ltv, lower risk to the bank, less mortgage interest to pay.
Obviously if the mortgage company will look at it negatively it is a non-starter.
There is also the point that if I need to show current paperwork to prove I have not been financially affected by corona then I would not qualify for the bbl anyway.