[mumbles]

Afternoon,

I'm sure I remember reading a topic about mortgages for the self employed on here, but I'll be damned if I can find it.

I'm not strictly speaking self employed, I actually operate as the sole employee of a Ltd co, of which I'm a 33% share holder (with my parents as the other share holders), and so the banks' policy is, understandably, to treat me as self employed. My current income for me as a touring lampy into the company is ~£40k, of which £200 goes to cover company costs and another £1200 to cover insurances, leaving a nice sizeable income. Further to this the company does various production and installation work with a turnover of ~£200k, obviously of which a large chunk (~£150k) leaves immediately to cover consumables, capital and other expenditure. However, in order to keep the company growing we have been investing as much as we can back into the company leaving relatively small salaries for myself and my father.

The problem is I'm wanting to buy a house at the moment to stop renting, and while RBS had been saying that they would accept a higher income figure for me than I can actually demonstrate, as I can prove the money is available, just requires a cutting back in investment, they have today come back saying that they are now unwilling to consider it on this basis. And in order to lend the money they would want to see an income of high £20ks or up into the £30ks being shown for me for at least 2 years. I don't really want to hold off for that long as I'd rather get on the housing market as soon as possible, while a) house prices are affordable, and b) to stop paying rent for which I'm not actually getting anything back in the long run.

Has anyone been in a similar situation, and if so do you have any advice? Are there any lenders or brokers that are willing to consider something outside of the normal employee model that you can recommend? Or did you have to suck it up, and hold on for a few years?

Thanks,
Martin

[Stuart91]

A lot of the bank's attitude may depend on how much of a deposit you are able to put down. Ultimately, all they are interested in is whether they can get their money back if your business goes downhill and you can't keep up repayments.

One option might be to have your parents act as guarantors. It's obviously a fairly major commitment for them to make, but if they are already in business with you they hopefully have confidence in its ongoing viability.

(Of course, I am not a mortgage advisor - you would do well to get proper professional advice before acting on any of my suggestions!)

[mumbles]

Ta Stuart, have been talking with the adviser all along, but understand he's moved on and someone else has replaced him in the branch Im dealing with, who isn't willing/able to overrule the computer system in odd circumstances. And every broker I've spoken to today has said something along the same lines that most lenders would want to see proof of previous actual income, rather than accepting proof of ongoing income.

Am able to put down £130k, based on a property value of £330k so roughly 40%, which in most circumstances would seem to have lenders licking their lips... They have however said they wouldn't accept either of my parents as guarantors due to their age, and their other financial responsibilites.

Beginning to tear my hair out at the lack of flexibility in the system. Entirely understand and agree that self-certifying mortgages helped cause the credit crunch, but can't believe that there are so few people outside of the 'normal' employment model that someone hasn't come up with a solution!

[Brian]

 mumbles, on 05 January 2012 - 03:40 PM, said:

Entirely understand and agree that self-certifying mortgages helped cause the credit crunch...

IIRC they've been 'banned' by the FSA.

[paulears]

Wow - I actually thought that one of the benefits of being employed by your own company was that you were a 'proper' employee, paying your tax and national insurance like all employees of companies. It seems odd that you could have an employee who wasn't 'family' and he'd have fewer problems getting a mortgage. Luckily, my own mortgage is in it's final years, but my wife worked for the Nationwide for over 25 years until last year, and she told me that as a self-employed person I didn't have a hope pod a mortgage, not because I was self-employed, but because I choose to reinvest my income in equipment and other business related purchases - essentially drawing very little, and spending a lot - which means I have a high income, and very high expenditure, meaning low profit - which I'm quite happy with. On paper, I'm poor. The annoying thing is that with two grown up sons, the house is half empty now and no doubt even emptier when the other decides not to come home between jobs. So down sizing could be good, but I'd have to go down quite a bit to be mortgage free - or hang around for five years. I rather need a unit for storage, but no way is any form of lending going to be possible. Very frustrating.

[ramdram]

What on earth makes you think that house prices will rise significantly or that bricks and mortar are still a good investment?

It was because of foolish policies by the lenders of allowing extraordinary multiples of salaries or even combined salaries to calculate loans which allowed prices to spiral out of control and give the false impression that your pension fund would get a nice cash injection when you downsized following your change in status to empty nester.

These days the banks now have to be seen as uber careful/responsible and caring about their customers' financial ability to service any loans...quite unlike their hitherto quite rapacious appetite for "earning" money at everyone's expense.

Suggest you bite the bullet and keep renting whilst keeping a very, very close eye on house prices. At the risk of teaching you to suck eggs you could do worse than googling "negative equity".

This post has been edited by ramdram: 05 January 2012 - 06:16 PM

[mumbles]

I have no misconceptions that any property may not rise in value, indeed may well fall, though given the size of deposit I can afford, reaching a point of being in negative equity isn't a serious concern! However continuing to pay the many thousands of pounds each year in rent does seem like a foolish use of money!

[cfmonk]

I would suggest getting a proper independent mortgage advisor. I would recommend mine but he now works in Dubai. Have a google for Independent Mortgage Brokers. They can check the whole market and find something that might suit you and the best bit is they do all the paperwork. This is the company he worked for: http://www.whiteoakfinance.com/ try giving them a call and see!

Good luck, it'll be worth it when you first walk into your own house :-)

Chris

[mumbles]

Brilliant, thanks Chris, as I say I've tried various brokers, but none who think they can do anything, so will try them tomorrow,

[Pete McCrea]

I would suggest looking for a decent IFA as suggested, that is able to access the whole market. I'm about to give a call to one recommended to me by a fellow director - he's local to us in Gloucester, so might be worth a call to you as your profile states Bath. He's helped several people I know who have various employment statuses.

Your story does make glum reading though - my mother-in-law passed away just before christmas, and I can see the only upside to this is that it might give us some help in getting on the housing ladder. However I had come across being classed as self employed a while ago when looking for a Loan IIRC, and despite being a salaried employee for 4 years at that point, they classed me a self employed because I own the majority of the business.

As far as I'm concerned, it makes sense to pay into owning property - if nothing else after a period I'll hopefully own my own house, and that maybe will benefit myself and my children in the future.

[adamharman]

Part of the problem is actually getting to speak to the right person at the bank, which can be almost impossible as they don't generally want to be involved with mundane stuff like mortgages.
I spent ages getting nowhere with the assistant manager or my local HSBC until one day he was off sick and I got to see the manager who actually had authority to make the decision, then it was all sorted and signed in under an hour.
That was after only 6 months of self employment!

[timperrett]

I am self employed and we are in the process of buying a house (my wife is on a similar salary to me full time doing a proper job) - we saw two independent mortgage brokers - one was ok, the other fantastic - they both immediately suggested Nationwide as they are generally the best at dealing with self employed people on the whole - and we got our first mortgage offer on the table, approved first time. Just needed my accountant to fill in a form which stated how much I earned year before last (income before tax not turnover), how much I earned this year and then they average the two years. He then had to say whether there was a likelihood of my income dropping this year (yes or no, and if so by how much) and then date and sign it. Simples!

So may I recommend the Nationwide to you!

[mumbles]

Thanks for all the suggestions, eventually succeeded, and completed last friday. After much talking to brokers, who all wanted to see a higher level of personal income, rather than taking account of the income we had previously been reinvesting, we ended up in our local Halifax branch, where a lovely mortgage manager understood the predicament and was able to find a way through their system, and agree an offer.

For anyone in the same situation in the future I would heartily recommend, as others have, building societies over banks for their better willingness to be flexible and help, and say stick with it and you'll find someone who can help in the end.

M

[GR1]

Hi Mumbles,

When you recommend the virtues of Building Socities and then mention your success with Halifax I presume you realise that Halifax PLC was taken over by Bank of Scotland to become HBOS whixh was later taken over by Lloyds bank. It is a bank. Similarly my mortgage with 'Burmingham Midshires BS' is actualy with RBS as a result of a string of takovers and mergers. There are lots of names for these lenders but you can often end up going round in circles.

Congratulations on a succesful outcome. The secret is : never give up and survey the whole market.

[Brian]

 GR1, on 30 March 2012 - 08:49 AM, said:

The secret is : never give up and survey the whole market.

I think the real secret is to not chop and change your accounts around.

I've been with the same bank for as long as I've had a bank account and get an excellent service with access to real people. I also take them on up those face-to-face account review meetings. At the recent one I was offered a personal loan, without any security being needed, for a surprisingly large amount of money and at an interest rate way lower than any published rates.