First time buyer mortgage/ broker query

[Zimma123]

Hi,

I am a first time buyer looking at a 10% deposit on a 165k property.

I have been to a few mortgage brokers regarding my current situation when looking to purchase this property.

My current situation is as follows with 2 years worth of accounts as a 100 share owner / director of a ltd company.

Full time job (at different company): 22.7k annual income
Company Dividends: 5k taken 2016 -2017
Company net profit:
2016: 38k
2017: 23k

I only take the 5k from my business as a divined (no wage taken) as i am growing it and as per HMRC guidelines it does not need to declared as it is just on the tax free threshold so i do not have a SA302/ tax overview.

I do have all paper work for accounts from my accountant.

My question is what is my affordability and what will the banks take into account i have been hearing many different stories (some on net profits other just taking into account of full time job and dividends)
I
even went to connels paid £600 and then told i cannot afford 148k but i can only be given 131k on my mortgage when they initially stated 200k.

If you can shed some light on this that would be great. Thanks again.

 

[Gordon - Commercial Finance]

Firstly please ignore the shameless irrelevant promotion above. This has been reported.

Are you looking to buy this property to live in? Or is this a buy to let or other type of investment?
Presuming its a home purchase due to your small deposit and the fact that you're being hammered on affordability...
Banks and other mortgage providers should take into account your actual income which would include salary and dividends, however I have often heard of people knocked back because they only earn £900 a month in salary and that is all that is considered. Based on what you've mentioned above it could well be that you're total income still doesn't stretch to the full amount even including dividends, and you've also not mentioned much about personal outgoings, which will make a difference.
Speak to a specialist who deals specifically with people in your situation - @tony84 is one who comes highly recommended from this forum.
Best of luck

 

[Zimma123]

@Gordon - Commercial Finance, Thankyou for replying.

I do have a 25k deposit but i want to hold back for improvements.

The house will be for me to live in.

I normally spend around £100 in fuel
£37 virgin media bill and £50 for EE

So close to around £200 a month. I am to believe it will be somewhat fruitless but here's me trying. Would appreciate @tony84 feedback

Thanks.

 

[Gordon - Commercial Finance]

I am to believe it will be somewhat fruitless but here's me trying.

Worth a shot but I think you might be struggling. Banks are being hit very hard over affordability on regulated mortgage and really for everything to do with regulated mortgages, and they can't really make exceptions and allowances.
I would say maybe plan for putting some more money in, and maybe start doing the improvements 6-9 months down the line?
That being said, putting 25k in won't get you to the magic 25% number, which is when your cash really starts to pay.

 

[Zimma123]

That is the plan to start the works later on however a 25k deposit is the most i can get potentially i can stretch to 20% by being gifted some money other than that not sure how to proceed.

 

[STDFR33]

It's not clear what the profit of the company is.

Do you draw a salary from the company that is lowering the profit?

What is the profit after tax?

Any lender will be worried that there is a big dip in profits from 17 to 16.

 

[Zimma123]

Hi, It is profit (loss) before tax as mentioned in my accounts.

I do not draw a salary from the company only via my day job.

The dip is due to re-investing profits and grow the business.

Profit after tax is below:

£19,072.34 2017
£32,844.40 2016

 

[STDFR33]

On the information provided I think you are going to struggle with just a 10% deposit.

Perhaps @tony84 can help?

 

[Gordon - Commercial Finance]

only via my day job.

Day job as well? And still struggling to make affordability? Sounds like you might be overreaching a bit.

 

[tony84]

Nice to see I am so well thought of on here

You have been told different things because different lenders have different criteria, some will work of PAYE + Divs, others PAYE + net profit some will work off the higher of the 2.

The complication for you comes with using income from 2 different jobs and the dip in profits.

With queries like this, the devil is in the detail but if I make a few assumptions at this stage then I would expect you to be able to get around £180-185,000 as a ball park but potentially up to £205,000 - both of those figures are in addition to your deposit.

You are probably going to need an experienced broker though. It is probably not the easiest to place and it is unlikely to end up on the high street - although I would not rule that out at this stage.