Getting a Mortgage with reduced salary?

[Turion]

There are some big assumptions in there..

Mainly - you can rent your other property and will get the rent you want also you're assuming that home owners will be able to "hold onto thier property" as opposed to letting the banks repossess it.

WHS

To me this OP seems to be living in 2000-7 cloud cuckoo land. Things are totally different now and just about every assumption any govt, business or individual has made has been blown apart.

He is betting all on property, by not selling his existing house to reduce that massive mortgage requirement for the lifestyle property he wants now, but cannot afford. Bet the 5.5x mortgage is interest only.

As for rentals, these have plunged since September, that's if a tenant is available. Your assumptions and finances are built on sand mate.

[TheFaQQer]

Bet the 5.5x mortgage is interest only.

These days, you need to prove how you are going to repay the mortgage as well, even if it's interest only - whether that's inheritance, other properties, share portfolio, pension pot etc. etc.

I'm amazed that anywhere is offering 5.5x anyway.

[BrilloPad]

WHS

To me this OP seems to be living in 2000-7 cloud cuckoo land. Things are totally different now and just about every assumption any govt, business or individual has made has been blown apart.

He is betting all on property, by not selling his existing house to reduce that massive mortgage requirement for the lifestyle property he wants now, but cannot afford. Bet the 5.5x mortgage is interest only.

As for rentals, these have plunged since September, that's if a tenant is available. Your assumptions and finances are built on sand mate.

The 2000-2007 boom times will be back : around 2020-2027.....

[Amar]

Ok firstly this i am trying to buy a family house not an investment property and the mortgage is not interest only. I already have one but its a small property. It is mortgage free. Now, the way i see it is that i dont need to sell the current property at this time given the property prices. However if in future i cannot keep up with the mortgage payments, then selling the previous property would be an option.

The question was whether forming a limited company where my income on paper would be less than what i would actually matter?

[TheFaQQer]

The 2000-2007 boom times will be back : around 2020-2027.....

Around the time that TPD runs out, then?

[TheFaQQer]

The question was whether forming a limited company where my income on paper would be less than what i would actually make matter?

You've already got an offer of 5.5x salary, so take it quickly while it's on offer.

[Turion]

What difference does it make? You say you've already secured the 250k.

[Amar]

I can see two possibilities,

1) Get the mortgage while i am employed with the umbrella company that would get me the £250k though i dont need that much. Then form the ltd company.

2) Find out how much i will be entitled to with a ltd company.

I am going to give contractor money a call.

[Freelancer Financials]

Mortgages for Contractors with limited companies

Mortgages for IT contractors with limited companies

For IT contractors, setting-up a limited company is often the most tax efficient method of paying yourself (if operating outside of IR35).

If you have a capable savvy accountant who is doing his job correctly then it could actually be more difficult to obtain a mortgage. He would probably have advised you to withdraw profit from your company using tax efficient means such as dividends or company loans. You might even retain excess profits within your company protecting you from higher rate personal tax.

However this means you often cannot show a substantial salary and as a result mortgage lenders will be reluctant to give you a mortgage. This is because most lenders have a simplistic view of what qualifies as relevant earnings for lending purposes. Contractors working through a limited company are assessed on salary and dividend drawings. As you’re probably well aware, for tax reasons, many contractors working through a limited company will draw a minimum salary and also restrict dividend payments to avoid higher rate tax. Although this is a perfectly reasonable tax planning strategy it also has the unintended consequence of reducing the amount a contractor is eligible to borrow under the standard criteria used by most mortgage lenders.

This is why it is often better to seek the advice of specialist mortgage brokers who know how to best package a mortgage application to senior underwriters. If your salary and dividend drawings do not reflect your potential earnings a mortgage specialist can present an annualised multiple of your current contract rate.

An example of the use of contract rate rather than salary and dividends might be: Daily contract rate of £400 on a 3 to 6 month rolling basis, would offer a potential mortgage income annualised over a 48 week year to be £400 x 5 x 48 = £96,000. Each lender will have their own criteria for determining relevant earnings and will apply a multiple of 3.5 to 4.5 times this figure. This will be subject to your credit score and any other financial commitments you have.

With regards to borrowing a multiple of 5.5 x your salary (relevant earnings), that doesn't sound right. The maximum multiple Halifax offers is 4.5 and that is subject to a high credit score and low expenditure commitments. The average multiple is 3.5 x annual earnings from high street lenders.

[SueEllen]

I can see two possibilities,

1) Get the mortgage while i am employed with the umbrella company that would get me the £250k though i dont need that much. Then form the ltd company.


2) Find out how much i will be entitled to with a ltd company.

I am going to give contractor money a call.

I would see which one you can get the lower interest rate for definite then decide what to do.