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    Default Mortgage

    Hi
    I'm looking to get a mortgage.
    I was wondering what size mortgage contractors are getting at the moment.

    My day rate is 375/day.
    gross salary is 10037.18
    annual dividends 28,645.04

    There's 22500 in my company which my accountant I can take (They said take more and put tax liability in ISA).

    First time buyer though living in London so don't expect anything to be cheap at the moment
    so may even buy a buy-to-let outside London first as my rent is London hasn't changed in 10 years and I'm in zone 1.

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    Should post faster


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    Quote Originally Posted by clearbrian View Post
    Hi
    I'm looking to get a mortgage.
    I was wondering what size mortgage contractors are getting at the moment.

    My day rate is 375/day.
    gross salary is 10037.18
    annual dividends 28,645.04

    There's 22500 in my company which my accountant I can take (They said take more and put tax liability in ISA).

    First time buyer though living in London so don't expect anything to be cheap at the moment
    so may even buy a buy-to-let outside London first as my rent is London hasn't changed in 10 years and I'm in zone 1.
    Hi Clearbrian,

    Based upon those figures and assuming that you would be looking to buy a residential property (rather than a buy to let which is calculated in a different way), there are a few different options to you.

    If you go down the contractor route with your income based upon a multiple of your day rate then the Limited Company and any income derived from it is essentially ignored. You would be looking at a maximum loan of circa 450,000 taking this approach. However, that figure will reduce if you have children (as they are classed as a financial dependent), you have any financial commitments like credit cards with balances, any personal loans, hire purchase agreements, car finance or lease agreements or finally if your credit score is not great (if you have missed/late payments, defaults or county court judgements).

    If you go down the route of being assessed as a Limited Company Director which will give you access to a greater number of lenders, then you'll find you probably wont be able to borrow as much. Assuming you have at least 2 years finalised accounts and the previous years' figures were not too dissimilar from the salary and dividend figures you have quoted above then you'd be looking at a very maximum of circa 193,000.

    There could be a middle figure too as some lenders will assess your Limited Company accounts by looking at the net profit of the company plus your salary, so dependent upon what your net profit figure is, add your salary to that and the maximum you can borrow from a lender who will assess your income in that manner will be a maximum of 5 times whatever that figure is.

    Regarding the buy to let side of things, you should meet lender's criteria when it comes to income. A lot of them simply wish to know your own personal earned income is over 25,000 or 30,000 (which your salary and dividends are) but affordability for buy to lets is predominantly based upon the rental income the property is likely to achieve. Lenders wish to see that the rental income you will get is going to be at least 125% of the mortgage payment.

    You may also be severely restricted going for a buy to let property as a first time buyer as a lot of lenders require you to be an 'owner occupier' e.g. you own the property you live in, before they will consider a buy to let mortgage application. Thankfully there are a few lenders who will consider a first time buyer, first time landlord for a mortgage application though.

    Hope that helps?

    Ben

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    interesting to hear that BTL lenders will include dividend income for purposes of the "earned income" test. Do they all do this, or some only? Do they want to see this for a number of years (i.e. some finalised accounts), or is it possible in your first year of contracting?

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    My post count is Majestic

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    Rather than discuss details of your mortgage on here you would be better off finding contractor providers and go engage with them. There are at least three that post on here. They will be able to answer your questions on the phone in a lot more detail than just making assumptions and general chat on here.

    Here are a list of all the threads that contractor mortgages have been discussed. You will see all the providors replying and answering all manner of questions, some you may have, others you may not have realised you need to ask yet but from them all you will get a good understanding of the options available to you. After that pick the phone up and discuss your options in detail.

    mortgage site:forums.contractoruk.com/accounting-legal/ - Bing

    https://www.google.co.uk/?gfe_rd=cr&...ntractoruk.com

    Check the mortgage links on the right as well (towards the bottom)
    'CUK forum personality of 2011' - Winner - Yes really!!!!

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    Quote Originally Posted by Syntyrion View Post
    interesting to hear that BTL lenders will include dividend income for purposes of the "earned income" test. Do they all do this, or some only? Do they want to see this for a number of years (i.e. some finalised accounts), or is it possible in your first year of contracting?
    Yes, most lenders will do this. Others will look at your share of the net profit which not only includes your dividend income but also any income you may have retained in the Limited Company. Very few lenders won't recognize dividend income so that shouldn't be a problem.

    You normally need 2 years minimum finalized accounts so if you are in your first year of contracting it wouldn't be possible to take this avenue and you may need to go for a lender who references contract rate annualised or who doesn't reference income (of which there are only a few left now).

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    Still gathering requirements...


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    I'm going through the process with Natwest and they would consider your income as 38k as its strictly salary plus divs only. If your last two years accounts show an increase then it's the average of the two if they show a decrease then it's the last years only.
    Luckily my numbers still worked out but was a shock that they will not consider retained profit so something to bear in mind when picking a lender.

    M.

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    Quote Originally Posted by mmmBeer View Post
    I'm going through the process with Natwest and they would consider your income as 38k as its strictly salary plus divs only. If your last two years accounts show an increase then it's the average of the two if they show a decrease then it's the last years only.
    Luckily my numbers still worked out but was a shock that they will not consider retained profit so something to bear in mind when picking a lender.

    M.
    Very few lenders will consider true retained profit, sadly.

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    Quote Originally Posted by clearbrian View Post
    Hi
    I'm looking to get a mortgage.
    I was wondering what size mortgage contractors are getting at the moment.

    My day rate is 375/day.
    gross salary is 10037.18
    annual dividends 28,645.04

    There's 22500 in my company which my accountant I can take (They said take more and put tax liability in ISA).

    First time buyer though living in London so don't expect anything to be cheap at the moment
    so may even buy a buy-to-let outside London first as my rent is London hasn't changed in 10 years and I'm in zone 1.
    As well as being assessed on your contract rate, there are a number of lenders, like Coventry Building Society, Virgin Money and Clydesdale Bank and a few more that will assess your affordability on your companies net profits plus salary. This typically allows you to borrow more than on just being assessed on your Salary & Divs. But like you've heard, being assessed on your contractor rate lets you borrow the most. In any case, if you're looking for an investment property and not one to live in, you will have to secure a BTL mortgage. The majority of BTL lenders only need to see income over 25k as long as the property can wash it's face (the rental income covers the mortgage interest payments).

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