Only 6 months self employed - Mortgage not possible....Loan??

Moneymissy

Hi all, I've been self-employed as a director of my ltd company, together with my colleague, for 6 months. I've been told by mortgage broker after broker that I can't get a mortgage until i've been self-employed for a minimum of 1 year, in most instances 2 years, and can provide accounts.
My questions are:

• Why? If I was employed by another company I could apply for a mortgage after only 3 or 6 months.
• Could I apply for a loan to purchase the property, together with the equity from my current home, then pay off the loan with a mortgage later on?
• Why are self-employed people discriminated against, employed people have just as much chance of their company going down the pipes as my company.

Old property equity £175,000
New Property value £375,000
Loan/mortgage amount £200,000
Mortgage LTV 53.3%
Anyone got any ideas? Thanks

CSI_Yorkshire

Moneymissy said:

• Why? If I was employed by another company I could apply for a mortgage after only 3 or 6 months.
• Why are self-employed people discriminated against, employed people have just as much chance of their company going down the pipes as my company.

If you were employed by a small company that had only existed for 6 months and didn't have any actual proof that it was sustainable or profitable then you would likely also struggle. 

Employed people overall have a significantly smaller chance of their company going down than the self-employed, plus generally have a consistent income even if the business is doing badly and often protection like notice periods or redundancy money.

This is not discrimination, this is risk analysis.

Moneymissy said:

• Could I apply for a loan to purchase the property, together with the equity from my current home, then pay off the loan with a mortgage later on?

Where are you planning to get a £200k unsecured loan?  I guess in principle it would be possible, but seems like a particularly expensive option.

Newbie_John

Moneymissy said:

• Why are self-employed people discriminated against, employed people have just as much chance of their company going down the pipes as my company.

This is not true.
More info here:
https://www.moneysavingexpert.com/mortgages/self-employed-mortgages/

Mark_d

If you were an employee then I suspect the bank would consider the track record of who you work for.  So if you've passed your probationary period and are working for a stable company then you'd be less likely to default on a mortgage.

Do you think you could get an unsecured loan for £200,000?  Unless you're securing the loan against a stable security (a mortgage) then I'd expect a very high interest rate.

How much risk lenders are going to take depends on your track record.  If you started working for a startup and have no credit history then I expect you'd struggle getting credit

JMA74

1.  Yes you could although I have certainly had cases declined where people have been paye employed by a company with no track record
2. You could apply for a loan but not sure how you would release equity if not as a mortgage. The sellers have to be physically given cash on completion, not an equity stake in your house. 
3.  Discrimination is a strong word but it generally comes down to the fact that more self employed people try to defraud the banks than employed people.   How does a lender know your business is making money without seeing accounts?  Anyone could set up a company, deposit 50k in to it, and then pay themselves a £15k a month salary for 3 months.    The chances of am employed person being able to create an income like this is a lot smaller.   Same reason that someone employed in a family business will be dragged through underwriting,  it's easy for them to just say 'dad can I get a payrise for a few months so I can get a mortgage'

Some lenders can lend on projected figures but this is usually for established business going through a growth phase and needs the accountant to give a lot of input.   Lending to a new business is not going to be done on projected figures unfortunately 

ACG

Most businesses fail in the first year. By trading for a year, you are evidencing you are not most businesses. 

How does the lender know that you have not taken on loads of debt with suppliers and not yet paid them?
How does the lender know that you have been responsible enough to put money aside for the tax man? 
How does the lender know you do not have a large annual bill that will not come through at the end of the year?

By having one years accounts, its improves the chances of risk to lenders. Also you have regulation to thank, lenders have to be able to assess peoples incomes, they cant do that without proof of income. People have a tendency to lie about their income... Do you remember self cert mortgages and the problems people who took those mortgages out have? Obviously its the lenders fault for allowing them, not the applicants fault for lying/getting it wrong. 

Lastly, what is your annual income? Without trading for a year you have no annual income. What happens if you are a gardener or a father christmas? 90% of your income might come during a specific 6 or 2 month period...

You are definitely not being discriminated against.