95% deposit but cannot get mortgage

ach45

I think I have exhausted all possible options but if anyone has advice on securing a mortgage for just 5% of the property value, please put me out of my misery!

Situation as follows
Property = £400k
Deposit (primarily gift from relative) = £380k
Partner and I run a business which makes very minimal profit of £5k pa. Both of us also have another job (so we are self-employed and employed) which bring in another £10k pa
We have recently stopped being eligible for UC due to savings exceeding £16k so no benefit income currently. So total income = £15k
We have two children
We have business liabilities (and because we are a partnership not a company these credit cards/loans are in our names). 

Brokers we have spoken to say our debt to income ratio is simply too high. 

Our current rent is far more than the monthly repayment on a £20k mortgage would be but this appears irrelevant to lenders.

We have £25k in a LISA which is a main reason for wanting a mortgage (rather than just finding a cheaper property)

Hoenir

How much debt do you have ? 

ach45

Actual personal debt is £4k (overdrafts and credit card)
In the business, £300k (with £500k of assets)

fatbelly

For 20k I'd be looking at a personal loan.

https://www.moneysavingexpert.com/eligibility/loans-calculator/search/

housebuyer143

Do you need a mortgage to use your Lisa? Don't you just need to buy a house?

silvercar

housebuyer143 said:

Do you need a mortgage to use your Lisa? Don't you just need to buy a house?

Yes you do. You can get a private mortgage, but it would need to be from someone who isn’t a relative or in law of a relative. I think an aunt or uncle would be the nearest relative allowed. Or it could be from a friend or business colleague.

easiest way would be for one of you to find some employment for the short term.

On-the-coast

Easiest way would be to “put all your cards” in front of the sellers agent and say “it’s a deal & I’m a cash buyer for £375k”. That allows for the value of the Lisa dropping a bit too. 

ACG

You need a small building society who will accept with an accountants letter/proof that the debts are business related. There is more work involved in that which plays into the next point.

A £20k mortgage... As much as I like to think I am not mercenary, the income on a £20k mortgage is about £60-70 and thats before everyone takes their cut, net it equated to about £40-50. 

Im not touting for business here, but our terms say we can charge a maximum of £750 for mortgages under £100k. Even with that higher fee, the income would still be about 20% below our average. If you are going to brokers who charge £0-500, they are probably putting in about 20 minutes work and thinking its not worth it. If your going to a fee free broker, it will probably end up costing them money. 

It probably can be done. But you are in business, you know what its like it has to be worthwhile. Dont give up, but maybe try some local brokers rather than the big call centre firms. 

se2020

silvercar said:

housebuyer143 said:

Do you need a mortgage to use your Lisa? Don't you just need to buy a house?

Yes you do. You can get a private mortgage, but it would need to be from someone who isn’t a relative or in law of a relative. I think an aunt or uncle would be the nearest relative allowed. Or it could be from a friend or business colleague.

easiest way would be for one of you to find some employment for the short term.

They changed the wording on this in April.
It now says "anyone connected""

I'm not sure how distant a relative needs to be or what happens if a god parent also happens to be a private mortgage lender?
Or how far they go into checking for connections?

ach45

Many thanks for the helpful comments. I wasn't familiar with the idea of a private mortgage. Worth looking into! I did wonder about the fees on a small mortgage making it not worth bothering with from a broker's point of view, so thanks tor that perspective.

Hoenir

ach45 said:

In the business, £300k (with £500k of assets)

If this business is only generating a miminal £5k of profit between you. Then the underwriters concerns are evident. In basic terms the numbers aren't stacking up.