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  • FIRST POST
    • heidiann
    • By heidiann 19th Aug 19, 2:59 PM
    • 16Posts
    • 2Thanks
    heidiann
    Mortgage eligibility for a Freelancer / Self-employed: based on NET or GROSS income?
    • #1
    • 19th Aug 19, 2:59 PM
    Mortgage eligibility for a Freelancer / Self-employed: based on NET or GROSS income? 19th Aug 19 at 2:59 PM
    Hi,

    I'm self-employed, (trading as a Limited Company, 100% shareholder/director - not sure if any of this matters) and I want to apply for a mortgage this year.

    Would my mortgage eligibility be based on my NET or GROSS income?

    I've been told it's different if you employ yourself.

    Thanks in advance for your help!
Page 1
    • JMA74
    • By JMA74 19th Aug 19, 3:07 PM
    • 512 Posts
    • 364 Thanks
    JMA74
    • #2
    • 19th Aug 19, 3:07 PM
    • #2
    • 19th Aug 19, 3:07 PM
    What type of work is it? IT Contractor?
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • ACG
    • By ACG 19th Aug 19, 3:13 PM
    • 19,416 Posts
    • 11,010 Thanks
    ACG
    • #3
    • 19th Aug 19, 3:13 PM
    • #3
    • 19th Aug 19, 3:13 PM
    Generally speaking it would be Gross annual income - before tax but after expenses.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • heidiann
    • By heidiann 19th Aug 19, 3:20 PM
    • 16 Posts
    • 2 Thanks
    heidiann
    • #4
    • 19th Aug 19, 3:20 PM
    • #4
    • 19th Aug 19, 3:20 PM
    What type of work is it? IT Contractor?
    Originally posted by JMA74
    Graphic / Web design. Does that matter?
    • kingstreet
    • By kingstreet 19th Aug 19, 3:48 PM
    • 35,435 Posts
    • 19,361 Thanks
    kingstreet
    • #5
    • 19th Aug 19, 3:48 PM
    • #5
    • 19th Aug 19, 3:48 PM
    Lenders typically take your director's remuneration and dividends from your SA302s; or your director's remuneration and share of post-tax net profit from the company accounts.

    Some lenders take latest year's figures, others take an average if the latest year is higher than the previous one.

    If you do have a daily contract rate, some lenders will work from this.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • csgohan4
    • By csgohan4 19th Aug 19, 3:51 PM
    • 6,421 Posts
    • 4,306 Thanks
    csgohan4
    • #6
    • 19th Aug 19, 3:51 PM
    • #6
    • 19th Aug 19, 3:51 PM
    I can't stress the importance of getting the right broker who can give you a selection of lenders from fast offer to slow but may take ages.


    They will chose the right lender for you depending on what company accounts and SA302's you have
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
    • JMA74
    • By JMA74 19th Aug 19, 3:57 PM
    • 512 Posts
    • 364 Thanks
    JMA74
    • #7
    • 19th Aug 19, 3:57 PM
    • #7
    • 19th Aug 19, 3:57 PM
    Repeating previous comments but generally there are enough lenders in our industry to have them view it all differently.

    Some will work from daily rate x 48 weeks if there is a daily rate
    others will work from salary and dividends since you are in a ltd company
    Some take salary plus share of net profit after tax.
    A couple of outliers take salary plus net profit before corporation tax

    Ask around colleagues or similar types of works and get a recommendation for a broker and sit down and see what you want to do. The lenders that do things differently tend to be a bit slower and heavier on paperwork. Maybe you can get away with doing it the easy way if the figures allow.

    Advice isnt always the cheapest rate, it might be you value your mental health more than the stress of dealing with a horrific lender who will save you a few pounds a month (although thats what you pay a broker for I guess). By going through priorities and requirements you will get a clear idea of where you stand or what direction you need to head towards.
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Hungary971
    • By Hungary971 19th Aug 19, 4:32 PM
    • 12 Posts
    • 3 Thanks
    Hungary971
    • #8
    • 19th Aug 19, 4:32 PM
    • #8
    • 19th Aug 19, 4:32 PM
    Btw you are an employee or director not self employed.

    If you call yourself that you are an HMRC enquiry waiting to happen
    • amnblog
    • By amnblog 19th Aug 19, 5:19 PM
    • 11,305 Posts
    • 4,547 Thanks
    amnblog
    • #9
    • 19th Aug 19, 5:19 PM
    • #9
    • 19th Aug 19, 5:19 PM
    Btw you are an employee or director not self employed.

    If you call yourself that you are an HMRC enquiry waiting to happen
    Originally posted by Hungary971
    Not as far as a mortgage lender is concerned.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • sal_III
    • By sal_III 20th Aug 19, 7:34 AM
    • 1,197 Posts
    • 1,158 Thanks
    sal_III
    Some will work from daily rate x 48 weeks if there is a daily rate
    Originally posted by JMA74
    You missed a multiplier there, can't remember the exact formula, it has always been roughly day rate x 1000 in my mind. It's all assuming outside IR35 if you are a contractor.

    Speak to a broker, there are several who specialise in such Mortgages and know all the right Lenders.
    • JMA74
    • By JMA74 20th Aug 19, 7:58 AM
    • 512 Posts
    • 364 Thanks
    JMA74
    You missed a multiplier there, can't remember the exact formula, it has always been roughly day rate x 1000 in my mind. It's all assuming outside IR35 if you are a contractor.

    Speak to a broker, there are several who specialise in such Mortgages and know all the right Lenders.
    Originally posted by sal_III
    Daily rate x 1000 is crazy high. A day rate of 400 would put a mortgage of nearly 2million available with this calculation.

    Day rate x 5 days a week x number of weeks the lender uses (usually 46 but sometimes a bit higher or lower) is a much more standard calculation
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • julicorn
    • By julicorn 20th Aug 19, 9:23 AM
    • 814 Posts
    • 3,335 Thanks
    julicorn
    Daily rate x 1000 is crazy high. A day rate of 400 would put a mortgage of nearly 2million available with this calculation.
    Originally posted by JMA74
    Surely 1,000 x 400 = 400,000? I'm assuming they mean the multiplier as the total available mortgage amount. Sounds like the other thing you're talking about might be the annual income the lender will consider, in which case that would be 400 (day rate) x 5 (work days in a week) x 46 (weeks they'll consider) = 92,000, which if they'll lend up to 4.5 times the annual salary would be 414,000, so virtually the same amount.
    Original mortgage: December 2017, 203,495
    MFW start: April 2018, 201,800
    Current: 162,500
    • JMA74
    • By JMA74 20th Aug 19, 9:45 AM
    • 512 Posts
    • 364 Thanks
    JMA74
    Surely 1,000 x 400 = 400,000? I'm assuming they mean the multiplier as the total available mortgage amount. Sounds like the other thing you're talking about might be the annual income the lender will consider, in which case that would be 400 (day rate) x 5 (work days in a week) x 46 (weeks they'll consider) = 92,000, which if they'll lend up to 4.5 times the annual salary would be 414,000, so virtually the same amount.
    Originally posted by julicorn
    Maybe crossed wires. I thought the daily rate x 1000 was the way the base income was being calculated and then lender multiplier on top.

    Comes to roughly the same amount i guess, never heard of the x1000 way of doing it
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • julicorn
    • By julicorn 20th Aug 19, 9:58 AM
    • 814 Posts
    • 3,335 Thanks
    julicorn
    Maybe crossed wires. I thought the daily rate x 1000 was the way the base income was being calculated and then lender multiplier on top.

    Comes to roughly the same amount i guess, never heard of the x1000 way of doing it
    Originally posted by JMA74
    I see what you're saying - yeah, day rate x 1000 would be wild for yearly income, seeing as there's only 365 days in a year.
    [I also have no idea about any of this btw, so can't vouch for lenders using one or the other system or something completely different!]
    Original mortgage: December 2017, 203,495
    MFW start: April 2018, 201,800
    Current: 162,500
    • heidiann
    • By heidiann 20th Aug 19, 12:05 PM
    • 16 Posts
    • 2 Thanks
    heidiann
    Thanks everyone for all the helpful information! It helps me to determine better how far off I am from getting the mortgage I want so I can now start planning a bit better financially.

    Also, if anyone has a great broker they can recommend in or around London, that would be great.

    Thanks again!
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