Reply to: How much can i borrow on my next property?

[Power Mortgages Ltd]

Many thanks for this. By 'Other circumstances', could things like a lot of exisiting equity in property count? Also a lot of experience in the industry?

Equity in property will help, yes.

For example, Clydesdale will need you to have been contracting 2 years or if you have not contracted 2 years then you must have been working in the same line of work/same industry for 3 years and they will only lend to a maximum of 70% in this instance so if you have more than 30% equity/deposit then Clydesdale should be able to assist.

Industry experience will also go well in your favour if you can demonstrate that you have worked in the same line of work for a long time, especially if there are no breaks in your work history.

Hope that helps?

[northernladuk]

OK - badly worded! I was picking up on the earlier bit about your CV and experience/qualifications in the industry carrying some weight in risk reduction for a lender.

It's the concept that is funny.. Not the wording lol.

Best get my CV sent to my lender sharpish

[Gomez]

A lot of experience is going help with you mortgage application... Really??? ��

OK - badly worded! I was picking up on the earlier bit about your CV and experience/qualifications in the industry carrying some weight in risk reduction for a lender.

[northernladuk]

Many thanks for this. By 'Other circumstances', could things like a lot of exisiting equity in property count? Also a lot of experience in the industry?

A lot of experience is going help with you mortgage application... Really??? 😂

[Gomez]

It does limit your choice in lenders but there are still options available depending upon other circumstances, yes.

Many thanks for this. By 'Other circumstances', could things like a lot of exisiting equity in property count? Also a lot of experience in the industry?

[Power Mortgages Ltd]

On the topic of this thread, would some kind soul explain whether any mortgage lenders will lend to you as early as say 2 months into your first contract? I cant see this query answered anywhere explicitly but I'm kinda guessing that if they are going on day rate multiples, CV's and firm contracts, it may be possible to get a morgage quite soon?

I spoke to my current lender (already have a mortgage) and they said they would want to see 2 years of accounts if I had a Ltd company. THis was not one of the 'specialised' contractor lenders though.

It does limit your choice in lenders but there are still options available depending upon other circumstances, yes.

[northernladuk]

On the topic of this thread, would some kind soul explain whether any mortgage lenders will lend to you as early as say 2 months into your first contract? I cant see this query answered anywhere explicitly but I'm kinda guessing that if they are going on day rate multiples, CV's and firm contracts, it may be possible to get a morgage quite soon?

I spoke to my current lender (already have a mortgage) and they said they would want to see 2 years of accounts if I had a Ltd company. THis was not one of the 'specialised' contractor lenders though.

When I applied with less than two years accounts then just used my permie wage to make up the two years and used that figure. I was about a year and 3/4 in though. 2 months in to your first contract is gonna make you a bit of risk. You won't pass the criteria for some lenders like Virgin who want to see a history of contracts but others might be flexible. I'd suggest you speak to someone like Freelancer Financials first through.

[Gomez]

On the topic of this thread, would some kind soul explain whether any mortgage lenders will lend to you as early as say 2 months into your first contract? I cant see this query answered anywhere explicitly but I'm kinda guessing that if they are going on day rate multiples, CV's and firm contracts, it may be possible to get a morgage quite soon?

I spoke to my current lender (already have a mortgage) and they said they would want to see 2 years of accounts if I had a Ltd company. THis was not one of the 'specialised' contractor lenders though.

[northernladuk]

Bloody Sockies.


Hope that helps?

FTFY

[Power Mortgages Ltd]

The usual sales pitch says 1200 times my day rate, but I suspect that there is a wider market if i have a 25% deposit and 4 years of company accounts. For reference my usual day rate is 400 and under the 1200 rule i can only borrow 480k when i need 540k for my dream home.

I know i could try and get a better day rate, but i'd like to see if anyone else has used a 'whole of the market' mortgage broker instead of a 'contractor broker'.

Ignoring any unsecured commitments or financial dependants you may have which will probably reduce your maximum borrowing potential the maximum amount you are likely to be able to borrow will depend upon how you prove your income.

Going down the route of using your contract, most lenders will annualise your contract rate over a 5 day week and either 46 or 48 week year.

Take Halifax for example (the biggest contractor lender), they use a 48 week year so your income for mortgage purposes would be £400 x 5 (days a week) x 48 (weeks per annum) = £96,000. The VERY maximum you would ever be able to borrow from a lender is 5 times your income but more and more lenders are reverting to a safer 4.5 times income as a maximum income multiple nowadays to stop people borrowing 5 times their income when rates are low and it appears that they can afford payments only for them to start to struggle when payments increase in a few years when Base Rate eventually returns to the 3-4% it needs to be to support a fully functioning, thriving economy.

The £96,000 Halifax will be assessing your income as will be very close to the turnover of your Limited Company unless your day rate has changed in the recent year, you took time out during the year, you work more than the 5 days a week or you have other income paid into the Limited Company.

Ignoring the contractor route, there are no lenders who will lend purely on turnover of a Limited Company. As they always state on Dragons Den, Turnover is vanity, profit is sanity so lenders will be wanting to assess the profit of the Limited Company which is interpreted differently from lender to lender.

The majority of these lenders will wish to average the figures over your last 2 or 3 years accounts:

You have lenders who will look at your share of the net profit before the deduction of corporation tax plus any salary you have taken.

You have lenders who will look at your share of the net profit after the deduction of corporation tax plus any salary you have taken.

Lenders who will look at your salary and dividend draw plus profit you have retained for the current financial year accounts (not overall profit you have built up over a number of years).

Finally you have lenders who only look at salary and dividends.

Put simply, the best way of borrowing the most is based upon a multiple of your contract rate, not your accounts as any one of the above is highly unlikely to give you a figure higher than simply annualising your contract rate.

Therefore, there isn't any chance of you getting a mortgage of £540,000 unless your day rate is higher or you have a partner who earns which you can include on the application (their income must be separate to yours - e.g. you cannot use any dividends or salary they may draw from the Ltd Co as their income if you are using contract rate annualised as your income).

When borrowing over £500,000 Halifax no longer lend 5 times income either, they will only lend 4 times income so realistically, to get a mortgage of £540,000 your day rate would need to be £525 a day so a lender who would lend 4.5 times income could assist.

The level of deposit is immaterial because if you do not earn enough to support a mortgage of £540,000, it doesn't matter if you put down £10,000 or £110,000 as the deposit, the point about you not being able to support the loan still applies.

Likewise, having 4 years accounts makes no difference either. A lender will not lend more just because you have been in business longer than others. Having 4 years accounts will mean you have access to more lenders but that is simply more lenders who would tell you they cannot lend the full £540,000 unfortunately.

Hope that helps?

[MarillionFan]

The usual sales pitch says 1200 times my day rate, but I suspect that there is a wider market if i have a 25% deposit and 4 years of company accounts. For reference my usual day rate is 400 and under the 1200 rule i can only borrow 480k when i need 540k for my dream home.

I know i could try and get a better day rate, but i'd like to see if anyone else has used a 'whole of the market' mortgage broker instead of a 'contractor broker'.

Pfffff. My bank offered me 1.2 Million. Are you buying a one bedroomed flat?

[Taita]

As a contractor, you are in a very fortunate position. Generally speaking, lenders do not understand self employed clients.

However, as a contractor, you get 2 bites of the cherry when it comes to applying for a mortgage. You can either work off your salary and dividend or salary and net profit depending on which lender you approach. A few lenders will also consider retained profit if they feel the case is strong enough.

Obviously, there is also the more contractor friendly route which works off the daily rate which you have already discussed.

Sorry Martin but there have been lenders who understand self-employed clients ever since there have been self-employed-would-be-borrowers. I know of contractors who obtained conventional mortgages in the late 70's. It is all to do with how the case is presented to them......hence the 'specialist' brokers who have abounded since those days.

[TheFaQQer]

The usual sales pitch says 1200 times my day rate, but I suspect that there is a wider market if i have a 25% deposit and 4 years of company accounts. For reference my usual day rate is 400 and under the 1200 rule i can only borrow 480k when i need 540k for my dream home.

I know i could try and get a better day rate, but i'd like to see if anyone else has used a 'whole of the market' mortgage broker instead of a 'contractor broker'.

Wow - how times have changed.

Last April, you had only one year's accounts and now you have four!

Last April, you used Contractor Financials to get a mortgage. What figure did they use then?

[Martin@AS Financial]

Which lenders will consider retained profit? I'm looking to get a mortgage soon and this would make a big difference for me. I need a lender who will take into account my company's share portfolio.

Woolwich are the main lender who will consider retained profit in a limited company. This is on a case by case basis though.

[electronicfur]

A few lenders will also consider retained profit if they feel the case is strong enough.

Which lenders will consider retained profit? I'm looking to get a mortgage soon and this would make a big difference for me. I need a lender who will take into account my company's share portfolio.