Self Employed First time buyer Mortgage with HSBC

watermelonice

Hi MoneySaving people,

First of all, I would like to thank everyone who has shared their experiences regarding their mortgage processes. It is helpful to see that others have faced similar problems in the past and have found solutions.

My husband and I are currently trying to purchase our first home. I have been self-employed since January 2019, while my husband has been a full-time employee at the same company since February 2021. We had an offer accepted for a property priced at £585,000.

We applied for a mortgage directly with HSBC without using a mortgage broker, providing a 25% deposit and aiming for a 75% loan-to-value ratio (LTV). Our mortgage deposit consists of personal savings and company dividends. We submitted my husband's payslips and my company's accounts for the past two years, which show a net profit of over £100,000.

After a three-hour call with HSBC's Mortgage Advisor (MA), we passed the affordability criteria and hard credit check. However, the system required an underwriter to review our case. We were then referred to the underwriting process, and the MA requested my personal and business bank statements from the last three months. I promptly submitted these statements to HSBC's system.

I am still feeling nervous about our case, despite my company's strong performance over the past two years. I did not have a contract for the first three months of 2023, but I secured a new client last month, which resulted in my first business payment for the year. I am curious about the underwriting process. Is there a possibility that they may determine my company is not performing well at the moment and decline our mortgage application? This option doesn't seem logical to me since the year has not yet come to an end. Alternatively, will they only consider the company accounts from the last two years? I would appreciate any thoughts or insights. Thank you

DullGreyGuy

Your not self employed from the sounds of it unless you are incorrectly using the term "company"? Sounds like you are a contractor operating via your own PSC.

Our sole income comes from being a contractor but when we applied (Natwest) I'd been doing it for 7 years. They did ask for a lot of paperwork in relation to the company but was easy to provide and ultimately was approved without any notable issues on a similar priced property but a higher LTV.

Have you had similar gaps before? If so it may be worth pointing out prior years totals inc similar gaps. I had to do an inside IR35 for a role so were I to apply now I'd have one year with 50% reduction in revenue/profits but would be looking to point out that I had employee income from an umbrella at the same time so the total wasnt really different. 

watermelonice

You are absolutely right—I am not self-employed!! I actually own my own limited company.

While I have had a consistent work history in the past, a gap unexpectedly occurred at the beginning of this year.  When I sent last three month's business bank statements there was only one payment from the client. (I get monthly payments as IT contractor. ) 

simon_or

3 hour interview?!! They better give you a mortgage after that I don't think I've ever spent more than 15-20 minute speaking to my broker for applications.

I have had day-rate contracts on and off for a while now, though I do the outside IR-35 ones through my limited company and the inside ones through umbrella. I don't know anything about HSBC but some banks will have specific criteria for contractors so for example in the past even though I was doing it through my limited company I was able to borrow more by using a bank that would go by the day rate and ignore the accounts (I make large company pension payments so profits are always low). Usually they'll also have a maximum gap between contracts, I think you may be fine with a couple of months.

Next time find a solid broker, you get the exact same rate (or better with some banks that have exclusive rates for brokers or only deal with brokers) for a LOT less effort and if you don't want to pay a fee, there are plenty of no fee brokers.

Neilos9

I would be speaking to a broker as a back up, I would be surprised as you have had a break in contracts if this is HSBC's cup of tea, i would also question why the Advisor did not Glean this information in 3 hours of interogation...

kingstreet

Have you been asked for a letter from your Accountant confirming the dividend used for your deposit won't impact the company? If not, I suspect you will be...

If your last three months business statements don't look great you may have the same issue as you would if you'd approached a lender basing income on the gross value of your current or previous contract (ie daily rate x 5 x 46 or 48) as a gap in "employment" of more than a few weeks can often set the alarm bells ringing.

Your husband works for your limited company as well?

watermelonice

@Neilos9 Yes, I started to talk with a broker just in case. 

@kingstreet  No, my husband works for another company. Sorry for the misunderstanding! 

@simon_or  I only work with outside IR35 contracts and my income (salary+dividend) + my husband's salary is more than enough to pass affordability criteria. I don't think I would need a lender which gives mortgage based on day rate. 

We received an email yesterday from MA, and the underwriters requested the husband's bank statements and confirmation of a 12-month employment contract to validate his work in the UK over the past 12 months. 

Fingers crossed for a positive update from underwriters