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Am I an unrealistic FTB?

~shoozy~
~shoozy~ Posts: 77 Forumite
in House buying, renting & selling
Hello, given the issues I'm having with my LL it's kicked my bottom into sorting out my finances and looking at buying somewhere sooner than later.

My circumstances are that I'm a limited company contractor since 2014 with a couple of fixed term contracts (not limited company) during that time but have accounts to show stable income.
Currently on a rate that works out at approx £68k per year and at the moment I have £7k in savings, but can save £3k per month moving on.
No credit card debt or car loan, but have a personal loan of approx £23k outstanding (due to be paid off within 5 years)
I'm looking at property around £120-140k max in around 6 months time, I'll have around £22k saved.
Having the loan is stressing me out - am I being unrealistic trying to get a mortgage with this level of debt hanging over me?

Thanks in advance for any advice you might be able to give.

Comments

  • marliepanda
    marliepanda Posts: 7,186 Forumite
    If you can prove your salary to the lenders (I know its not always easy being a director but you seem established) then I see no problem at all wanting to lend barely 2x it.
  • spadoosh
    spadoosh Posts: 8,732 Forumite
    Name Dropper Photogenic First Anniversary First Post
    The doubt you put on yourself makes me wonder whats missing.

    Youve got earnings of £68k per year. And debt of £16k taking out the savings. You reckon you can put away £3k per month.

    Thats so easily doable it seems odd youre asking the question?

    Lets look at the repayment on a £140k mortgage (as in you borrow £140k). At 15% interest (up there with the highest interest rates ever charged on mortgages in the UK) it would cost £1800 per month over 25 years. Youre putting away £3k per month now. So would still have £1.2k left over. Thats assuming your mortgage is silly more expensive than what you pay in rent and at an interest rate not seen in 30 years. Realistically youd be looking at about £700 per month and thats top end.

    They dont care how much you owe, they car about your ability to pay it back. Banks like people borrowing money, its how they make theirs.
  • ~shoozy~
    ~shoozy~ Posts: 77 Forumite
    Thanks Spadoosh, it's the fear of the unknown that's making me question my ability to get a mortgage.
    Yes marliepanda, I think it's the director thing that's putting fear into me!
    All the mortgage calculators I've tried say I can borrow up to £290k - I don't want that much, I'm happy with £140k max in case the bottom falls out of things.
  • marliepanda
    marliepanda Posts: 7,186 Forumite
    ~shoozy~ wrote: »
    Thanks Spadoosh, it's the fear of the unknown that's making me question my ability to get a mortgage.
    Yes marliepanda, I think it's the director thing that's putting fear into me!
    All the mortgage calculators I've tried say I can borrow up to £290k - I don't want that much, I'm happy with £140k max in case the bottom falls out of things.

    When we applied (partner is same as you) they looked at 3 years accounts and wanted to see an upwards trajectory. The third year (furthest in the past) was a little sticky as he had bought out the other shareholders so profit was low due to that, but as profit was going up pretty hugely in the last 2 years they were happy with it.

    They did want his accountant to provide some woolly statement saying that he felt that the company was sustainable, and we got some bum covering' 'based on the info given to us by the client we believe things are fine but if theyre not you cant blame us' Totally pointless haha!
  • ~shoozy~
    ~shoozy~ Posts: 77 Forumite
    Great, thanks so much for your advice Marliepanda. I've got myself tied up in knots worrying about what they'll need! I'll speak to my accountant closer to applying for the mortgage and take it from there.
  • ReadingTim
    ReadingTim Posts: 3,970 Forumite
    Name Dropper First Anniversary First Post
    The real question is the extent to which you can find a property in the £120-140k range which you'd be willing and able to buy and live in. From an LTV and salary multiple perspective, you seem fine, but that £23k personal loan may cause issues from an affordability perspective. I also hope you've got your tax calculations correct....

    Problem is, £120-140k might not get you too much, depending on where you are in the country, meaning you'll be looking to borrow more. Which is where FTBer's problems really begin, as their budgets don't meet their expectations...
  • ~shoozy~
    ~shoozy~ Posts: 77 Forumite
    Thanks ReadingTim - I hope the tax calculations are correct too otherwise I'll be sacking my accountant...
    The area I'm looking at £120-140k is absolutely fine. You'll get a decent 3 bed semi for that and given that I'm on my own, I really don't want anything bigger/more expensive than that
  • letitbe90
    letitbe90 Posts: 345 Forumite
    edited 21 June 2018 at 2:26PM
    If you are a contractor, there are specialist lenders who use your contract as the basis of your earnings - rather than 3 years worth of accounts.

    If you google contractor mortgages, you'll see quite a few providers - if you go to a forum like contractoruk - it will have recommendations as well as forum discussions for it.

    As an example, I started my first contract role ever beginning of this year at a rate of £450 a day - I was able to get a mortgage in principle from this for just under £500,000. As long as you had a stable employment history and no adverse credit history, they may be the best providers of a mortgage for you.

    Halifax is often the bank they use but there are other very contractor friendly mortgage providers. However, to access them, you have to go via a broker, none of them seem to offer this directly. Some brokers charge a fee (at completion ~ £800) but there are also some brokers which do not charge any fees.
  • avacapri
    avacapri Posts: 55 Forumite
    the thing is not about the debt its about how it makes you feel, on the face of it you would have no problem in getting a mortgage buying a house and servicing the loan + some left over - but if the loan is stressing you out pay it off, being self employed can be stressful and we don't know your working background, contract etc
  • ~shoozy~
    ~shoozy~ Posts: 77 Forumite
    Letitbe90 - wow that's amazing, certainly gives me reassurance and some great pointers there.
    Avacapri - Absolutely, I totally understand that. When I took out the loan I wasn't concerned about paying it back, it's definitely affordable. The stress is coming from the whole "have I f****d up my chances of getting a mortgage because of this.

    Thank you so much for your help and input, it's really appreciated :)
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