Getting a Mortgage with reduced salary?

[Amar]

Hi Guys,

I have a year and half of contracting experience now and am now thinking of setting a ltd company. Just had the contract extended and have been told that there is another project that they want me to work on so i can see myself employed for 6 - 9 more months.

I have been house hunting and have seen some good properties. Now the problem i have is with my current paye status i can just say i earn 50-60k/year and get a mortgage of about 250000+. But if i was to form a company i would be stating that i earn £20k/year as the director.

How does all of this work? Do you put down your basic salary as your income or does income includes dividends etc.

[FarmerPalmer]

Give Contractor Money a call - they can get you a deal with a high street bank and base the borrowed amount on your hourly rate. They just need a copy of your contract.

http://www.contractormoney.com/

[Lewis]

Hi Guys,

I have a year and half of contracting experience now and am now thinking of setting a ltd company. Just had the contract extended and have been told that there is another project that they want me to work on so i can see myself employed for 6 - 9 more months.

I have been house hunting and have seen some good properties. Now the problem i have is with my current paye status i can just say i earn 50-60k/year and get a mortgage of about 250000+. But if i was to form a company i would be stating that i earn £20k/year as the director.

How does all of this work? Do you put down your basic salary as your income or does income includes dividends etc.

You used to be able to get a mortgage based on the contract value (i.e. salary + divs) but I don't know what is available nowadays in the credit crunch. Most banks know about contractors and how they work so it should be easy.

[FarmerPalmer]

You used to be able to get a mortgage based on the contract value (i.e. salary + divs) but I don't know what is available nowadays in the credit crunch. Most banks know about contractors and how they work so it should be easy.

The High Street banks all refused me direct when I tyold them that I was a contractor, but I could get a mortgage with them via Contractor Money with no problems - go figure

[BlasterBates]

I would wait a bit. According an expert on the BBC, prices were already 25% down, from peak, the statistics need to catch up, and he reckoned they'd be off by 50% before the market turned. Even cautious analysts that keep increasing the expected drop are at 35%.

[Sockpuppet]

The High Street banks all refused me direct when I tyold them that I was a contractor, but I could get a mortgage with them via Contractor Money with no problems - go figure

Same with me and a loan I wanted for a new bike. Said no until I got passed to the specialist team that understood what a dividend did.

[Turion]

I have been house hunting and have seen some good properties. Now the problem i have is with my current paye status i can just say i earn 50-60k/year and get a mortgage of about 250000+. But if i was to form a company i would be stating that i earn £20k/year as the director.

Wasn't this the cause of the house price bubble and of the many other debt related woes now present. Which banks are still giving 5x salary mortgages. What deposit do you have and how long could you hold out paying such a without work?

Luckily the banks are now protecting idiots from obtaining (risking) large amounts of other peoples money to buy houses whose prices are plunging and likely to end up 40-50% below peak.

[Amar]

Thanks for the posts guys, I been offered (5.5* salary) mortgage by Halifax. I see your point but i can pay back the money. I dont have any debts and have access to another property which will be rented to pay toward the mortgage for new property. I could keep up with mortgage payments without working for a year atleast using the rent from other property and savings.There is no point in saving money in banks as there is hardly any interest and even then the tax on savings kills off any benefit from it.

While house prices are falling, properties still are worth investing in. The house i am going for needs some repairs but it is well worth the money. If i get it for the price i want, it will be a great deal.People have seen how high the house prices went, so as an owner if the prices go down too much the owners just will hold on to their properties. So i think its best to get a good deal on a house that i want now than later on get no deal.

[Sockpuppet]

Thanks for the posts guys, I been offered (5.5* salary) mortgage by Halifax. I see your point but i can pay back the money. I dont have any debts and have access to another property which will be rented to pay toward the mortgage for new property. I could keep up with mortgage payments without working for a year atleast using the rent from other property and savings.There is no point in saving money in banks as there is hardly any interest and even then the tax on savings kills off any benefit from it.

While house prices are falling, properties still are worth investing in. The house i am going for needs some repairs but it is well worth the money. If i get it for the price i want, it will be a great deal.People have seen how high the house prices went, so as an owner if the prices go down too much the owners just will hold on to their properties. So i think its best to get a good deal on a house that i want now than later on get no deal.

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.

[TheFaQQer]

Thanks for the posts guys, I been offered (5.5* salary) mortgage by Halifax. I see your point but i can pay back the money. I dont have any debts and have access to another property which will be rented to pay toward the mortgage for new property. I could keep up with mortgage payments without working for a year atleast using the rent from other property and savings.There is no point in saving money in banks as there is hardly any interest and even then the tax on savings kills off any benefit from it.

While house prices are falling, properties still are worth investing in. The house i am going for needs some repairs but it is well worth the money. If i get it for the price i want, it will be a great deal.People have seen how high the house prices went, so as an owner if the prices go down too much the owners just will hold on to their properties. So i think its best to get a good deal on a house that i want now than later on get no deal.

5.5 * salary, based on what you are earning at the moment on a contract. And the banks wonder why they got into the mess in the first place

Can you keep up the mortgage payments with £0 income, though? That's the key question - if the client terminates the contract, and your tenants move out, how long can you make the repayments for and still live?

Mind you, since the second property is mortgage free (or else you wouldn't be able to divert the rental income to repay your second house), then you may get away with it.

I can't understand the perceived wisdom of borrowing such a large multiple, though, it has to be said. I remember struggling to make the payments on my first mortgage which was 3x salary, because I had so many other expenses to pay that I hadn't considered.