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Mortgage woes

I am about to end my mortgage deal and I am looking round for another. Since I took out my mortgage I have started my own company. i am not asking to borrow any more money than I can prove I have been able to pay for the last 5 years, 3 of which when I have been running this business.

My issue is that I pay a low wage and the remainder in dividends. To earn what I do as an employee under teh PAYE system I would need to gross £45k. Instead I am showing as earning around £27k. This is also what my profits are, although when I started up they were low as I started from a zero customer base and had set ups costs. I keep being tolda by building societies that I don eran enough to pay the mortgage as they keep treating this income as gross pay, when it isnt. I have shown them bank statements clearly showing my income, to no avail.

My other issue is that I have got firm sales for next year of £80k, £50k will be profit. This is not including any one new walking through the door. However, they are not interested in this but want to go back 3 years. I have never been asked to recall what I earned as an employee 3 years previously, and don't see the relevance.

In addition to this I am part of a BTL club. I am now told the fact I am buying with other is irelevant and I will be deemed the whole liability is mine. This is madness.

At no point is the equity in my btl of the capital asset of my business being included. I am taking home more money and own more assets than ever and I am struggling to get a new mortgage for the fisrt time ever!

Can anyone who has solved these issues or knows a lender who lends on net pay, PLEASE let me know!
N G

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By Anonymous
01st Mar 2008 07:55

Agree

It isn't fair, but you are what they perceive as a higher risk.

Some lenders don't understand the way that s/e set up their affairs and some are more switched on.

I had a client, ltd co with about 1 years trading, apply for a remortgage, and despite him having low salary/large dividend, it went through no problems. They didn't even write to me.

However, struggled for my own (modest) remortgage a couple of years.

You ma be interested to know, I have asked a couple of IFA's/brokers how to get round it, they've basically told me to make up the numbers to fit the scenario!!

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29th Feb 2008 17:48

Life isn't fair!
NG life isn't fair, why not stop moaning and face reality and use a decent broker. All mortgage lenders are different, all mortgage lenders have relationships with brokers, a good broker will be able to get you a good deal that no one else can but they can't work miracles. If London & Country Mortgages, a very large and nationwide broker, can't find you a decent deal I doubt anyone can.

And yes it is easier for employed people to get a mortgage on their income multiple than self-employed/company directors who like it or not, fair or not, are considered by many lenders as a bigger risk. However you moaning about it isn't going to change it.

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By Anonymous
29th Feb 2008 16:58

Not explaining myself
I think from reading some of the postings I am not making my issues clear.

I am aware that they will use my net profit and want the last 3 years. That is one of my issues. They are summarised as follows:

1.Any decent tax accountant should be able to legitimately lower the profits of a company through appropriate use of the tax system. I always do this on my own accounts.

2. Comparing my profits which are taxed at 20% with no NI is not comparing me like with like with an employee who would be taxed at 40% plus NI. Therefore I appear to need a higher mutliple than an employee who takes home the same amount of money as me each month. The society are comparing apples with pears.

3. As I started form a zero position my first period's accounts were low and bear no relation to today's figures. What is their relevance? If I was an employee who had only been in full time work for two years would they average my pay out with the amount I may have earned as a student 3 years previoulsy as a part time worker in MacDonalds?

I feel the 'system' is very much weighted against the self employed and 100% shareholders. The employed could just as easily lose their job.

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28th Feb 2008 19:57

What a moaner!
Assuming this is a personal mortgage you are talking about then I'm afraid your story doesn't really add up - are you telling us everything?I've just arranged a remortgage for a client through London & Country Mortgages and virtually all their income was dividends and the best deal was with a mainstream lender. They had no problems.

You say you have 25% equity to put down PLUS several thousand in deposit accounts. You must be asking for a high multiple not to find a mortgage, yes?

The other alternative is just to stay with your current mortgage provider until your £80K comes in and then try and remortgage.

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By frauke
29th Feb 2008 11:27

Lots out there
A lot of lenders will look at the net profit of the company if you own more than 20% of the company and treat it as your income!

They do this on the basis that as a shareholder you have the right to take that money as a dividend which could have been part of your income.

Therefore if your company made a net profit of 50K, and you own 50% of the shares - they will add 25K to your other income to get to the figure for mortgage purposes.

They will look at the previous 3 years, and consider the next year. Of course they will normally ask for an Accountants reference to confirm.

I have noticed lately, one particular lender no longer writes to me for accountants reference for any of my clients any more. But then I also have my own mortgage with them!

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By Anonymous
29th Feb 2008 10:50

Thanks Doug!
I can assure you I am telling you the truth plus I am putting down 71% not 25%!

I don't want to do a self cert mortgage as the rates are poor.

I have not been declined yet with the Yorkshire, who have the deal I want to go with, but it has been hard work when you are not the bog standard person who is employed and does not have a BTL.

I probably could get a less good deal but as I have an excellent credit history and I don't see on principle why I shoud be treated differently to friends who have much worse financial records but are employed.

As I thought this site was used by a lot of business owners I thought others may have found ways of getting round this rather than self cert. I also wondered if other btl owners have experienced the same draconian measures, where the rental income isnt included but the mortgage payment are.

I am not looking for a high multiple and only want to borrow what I already borrow.

I apologise if I want a good deal for my mortgage.


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29th Feb 2008 09:38

Good mortgage Broker
If it's any good, I know a very good independent Mortgage Broker (he is a client of mine) who won't charge a fee and is excellent, particularly with people having problems getting a mortgage. He doesn't charge a fee and is totally independent.

His name is Mike Rogers of The Mortgage Store and his telephone number is 01708 478317 or 07961 421623.

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By neileg
28th Feb 2008 16:59

Self cert
If this was a domestic mortgage, you'd simply go for a self cert. Not clear whether you're looking for a BTL deal, though.

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By Anonymous
28th Feb 2008 13:18

I am a high quality applicant
This is my point. I have a score of excellent on my credit history. I have no loans, no credit cards. I have 75% deposit to put down. I have equity in my BTL property, equity in my business. 4 savings accounts with over 4 figures in each.

This is not the issue. The issue is that they won't treat dividend income as net pay. They are treating it as gross, which is incorrect.

We have had this issue with several clients as well. About 50% of our clients pay themselves in this way hence my origianl question of how do other people or their clients who are paid via low wage/dividend mechanism get by on multiples?

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28th Feb 2008 11:24

LMD
I suggestt you speak to John Simon at London Mortgages Direct.


0208989 9666
If he cannot solve your problem it is probably insoluble

sorry the original number was a fax

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By Anonymous
28th Feb 2008 11:15

Times have changed ...
Extract from recent report:

British Bankers’ Association (BBA) figures showed that remortgages in January accounted for a record 49% of all mortgage approvals, as borrowers desperately sought to lock in the best deal they can

The BBA data also showed consumers paid off more on their credit cards & overdrafts - good news for individual consumers, but not great for an economy which has been dependent on debt-fuelled spending to keep it afloat for so long

There’s no sign that the impact of the credit crunch is going away. In fact, it’s getting worse. Nationwide building society now requires buyers to stump up a deposit of 25% or more in order to secure its best rates

Nationwide writes one in 10 mortgages - a spokesman told The Telegraph it’s because the cost of funding is higher and the housing market is cooling. He continued: What we would like to do is continue to lend strongly but with an eye on quality. If the only way of doing that is to accept a smaller market share, then we will

As Melanie Bien of Savills tells the Standard: We’re not seeing anyone going after market share. Instead they are increasing margins. Six months ago you could tracker rates at just below the Bank of England base rate, but now they are at least 0.5% above the base rate.

There can be no clearer illustration of why the housing market is not going to recover from this. Prices are going to fall, and they will fall for an extended period of time. Lenders have realised that they’ve allowed borrowers to stretch themselves too far. More to the point, if they want to use any future mortgages to raise money from the wholesale markets, they need to make sure that they are only of the highest quality so that they can get a decent rate

only extremely high-quality credit risks will be able to get good rates on mortgages, while everyone else will be left scrabbling for what they can get. That means we can kiss goodbye to the days of six times salary loans

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By Anonymous
28th Feb 2008 10:55

Have tried brokers
Hi, I have tried brokers but the deals they are getting are not competitive. If I had a poor credit history I would not have a problem with paying over the odds, but have assets of at least half a million pounds!

When I was a low paid 20 year old (20 years ago) with no assets, store cards, loans etc. people were falling over themsleves to give me a mortgage.

The world has gone mad!

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By neileg
28th Feb 2008 09:54

Broker
I'd try a broker. Makes non standard mortgages much easier.

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By Anonymous
27th Feb 2008 23:18

Thanks for that
btw, apologies for typos, it was written in a rush with cold fingers!

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27th Feb 2008 18:08

Here's a suggestion
The Chesham Building Society
12 Market Square
Chesham
Bucks HP5 1ER

Have found them very forward thinking in the past.

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