Mortgage - who knew it's so difficult?!

[R.Anders]

Hi all,

Perhaps fellow business owners have been in the same/similar boat:

My wife and I own our own business for a few years now.

Until SEP 19, we paid ourselves a very low wage as the business was loss making.

Whilst the business is still loss making, it has tripled its revenues in the last 9 months and we have £170k in cash and the balance sheet is very strong.

We have, for the first time, put an offer on a residential property and it was accepted. Thus began the nightmare to get an actual offer from a lender.

Most lenders won't even look at our case.

The main reasons are:
1. My wife's SA302 is ok for this year but the previous year since the wages were slim it badly hurts the amounts we can borrow.
2. I don't have SA302s at all because from HMRCs perspective, since I only get paid through PAYE, there's no need to file for SA302

which results in calculating our offer with half my wife's wage and excluding any of my figures! Which basically amounts to very (very) little.

So, for my question, I can think of 3 possible solutions:
1. Not buy anything and keep renting until we're dead.
2. Transfer my shares to my wife so at least I'm treated as employed. Not sure how/if the lender can check this but if they can, perhaps it won't look right that I have transferred my shares to her shortly before applying for a mortgage. Furthermore, I am not sure if there are tax implications for transferring those shares.
3. Apply for a UTR under my name. But again, lenders want two years so even if HMRC will "let me" file for SA302, I'm not sure if they will let me do it for the last two years and not just one?

So frustrating.

Appreciate input from people with knowledge and experience in this (rather than opinions please).

Have a nice weekend!

 

[Paul Carmen]

In the banks eyes you can't afford the mortgage, you don't earn the money required to pay back the loan and your other monthly commitments.

They'd expect and take into account dividends, but as you were loss making I'm assuming there aren't any. They are not interested in company cash flow, it's not a business loan, they are interested in your real income.

I'm not sure what transferring shares would achieve now, it will make a difference in future potentially, but not in the short term. There are also capital gains tax implications, so you need professional advice.

Depending on what banks you've been dealing with, you are also looking at a bad time, as loan to value and risk is being assessed differently since Coronavirus, I expect the high street lenders will be no help at present as they often want 3 years accounts.

Your best but would be to talk to a broker who specialises in this, they'll have access to lenders and mortgages that you'll never find yourself, who also will work with 1 or 2 years accounts. Have a look at these guys, they've got some online tools and specialise in your situation: https://www.simplylendingsolutions.co.uk/sole-trader-self-employed-mortgages/

 

[Gordon - Commercial Finance]

Also @tony84 specialises in these kinds of things

 

[R.Anders]

"I'm not sure what transferring shares would achieve now, it will make a difference in future potentially, but not in the short term. There are also capital gains tax implications, so you need professional advice"

I can apply for a mortgage in two weeks time (as an example, after I filed the transfer of shares) and I will apply as employed myself and my wife as self-employed. To my understanding, if you are employed, they will want last few wages, contract and perhaps a letter from the company accountant.
Obviously I will consult our accountant but if I understand correctly as I am transferring it to my wife there shouldn't be and tax event.

I have already spoken with two brokers, they recommend going the SA302 route but as mentioned, I don't have one. This is so bizarre, how will I ever get one if I don't earn anything that non-salary? even if the company was profitable, it doesn't mean I have to take dividends. I guess I have to start paying myself in dividends a little bit, just so HMRC will "allow" me to file for an SA302. Sounds ridiculous

 

[Financial-Modeller]

You offered to buy someone's house without the means to pay for it.

Somebody further along the chain will probably incur cost unnecessarily due to your actions.

In response to your question "who knew it's so difficult?" Have you seen the news during the last six months?

 

[DavidWH]

You offered to buy someone's house without the means to pay for it

I'm surprised they accepted the offer without an agreement in principle.

I've just gone through a mortgage application, and found it quite straight forward, the broker sourced the deal, and our accountant assisted with their questioning around Covid, and the losses (on paper) over the past few years.

 

[R.Anders]

You offered to buy someone's house without the means to pay for it.

Somebody further along the chain will probably incur cost unnecessarily due to your actions.

In response to your question "who knew it's so difficult?" Have you seen the news during the last six months?

We have 50% as a deposit, nice steady income and 2 property investments as well under my wife's name. We can afford it. We have been paying more in rent for 3 years now.

 

[R.Anders]

@DavidWH

I'm surprised they accepted the offer without an agreement in principle.

I've just gone through a mortgage application, and found it quite straight forward, the broker sourced the deal, and our accountant assisted with their questioning around Covid, and the losses (on paper) over the past few years.

We had an AIP, but they didn't ask those things at that time.

I'm assuming you had two years of SA302s?

Which lender?

 

[Mr D]

We have 50% as a deposit, nice steady income and 2 property investments as well under my wife's name. We can afford it. We have been paying more in rent for 3 years now.

However if your figures you provide show you cannot afford payments on the mortgage then its a problem for the lenders. They want the loan paid back over time, not repossession.

They'll use their own criteria to look at giving an offer. Just like you would if a customer asked you for credit.

So look at cheaper, look at waiting a year or two, look at changing how you do things (presumably your PAYE wages are already something you provided) or look for specialist lenders who you can expect to reflect any risks in mortgage rate. Fancy paying much higher interest payments?

 

[Paul Carmen]

I can apply for a mortgage in two weeks time (as an example, after I filed the transfer of shares) and I will apply as employed myself and my wife as self-employed. To my understanding, if you are employed, they will want last few wages, contract and perhaps a letter from the company accountant.

You aren't employed though, you're self employed hence the SA302 requirement. You essentially have no income you can prove, so lenders aren't interested.

If you transfer shares now that's something for the future, how will it help now? Will you magically have 3 or 6 months payslips to prove your income (potential minimums depending on lender criteria), no, you'll have them in 4 or 7 months time when you've been paid the new salary for the next 3 or 6 months.

This is so bizarre, how will I ever get one if I don't earn anything that non-salary? even if the company was profitable

The answer is you won't get one if you don't earn anything as non salary and don't pay dividends, as you have no taxable earnings and no provable income. Some lenders may take 1-3 years retained company profit into account, but you've stated the company isn't profitable yet, so they won' be interested in lending based on your current earnings/profit.

As has been said on this thread, you'll either need to wait, or speak to brokers who deal with specialist lenders and potentially be prepared to pay higher interest rates, if you can get a mortgage in your circumstances.

 

[R.Anders]

You aren't employed though, you're self employed hence the SA302 requirement. You essentially have no income you can prove, so lenders aren't interested.

If you transfer shares now that's something for the future, how will it help now? Will you magically have 3 or 6 months payslips to prove your income (potential minimums depending on lender criteria), no, you'll have them in 4 or 7 months time when you've been paid the new salary for the next 3 or 6 months.


The answer is you won't get one if you don't earn anything as non salary and don't pay dividends, as you have no taxable earnings and no provable income. Some lenders may take 1-3 years retained company profit into account, but you've stated the company isn't profitable yet, so they won' be interested in lending based on your current earnings/profit.

As has been said on this thread, you'll either need to wait, or speak to brokers who deal with specialist lenders and potentially be prepared to pay higher interest rates, if you can get a mortgage in your circumstances.

That's my point, I won't get SA302 since I don't earn anything outside a salary hence not self employed for HMRC perspective(I am getting paid a salary now, in case that wasn't clear. A decent one, especially for the size of mortgage we're after) but I'm classified as self employed by lenders and they expect sa302. Catch 22

 

[Paul Carmen]

@R.Anders the salary wasn't clear, but this is way beyond the scope of a business forum, I'm not and don't claim to be a mortgage broker/expert, I've just arranged my own a few times as a company owner/director.

You need specialist advice, as all your personal and company circumstances need to be taken into account. Not from a high street lender, or broker affiliated with an estate agent etc, you need a whole market broker who specialises in limited company/self employed mortgages. If they can't help you, you can't get a mortgage.

The company I listed in my first post do this and they have really good reviews, try talking to them...

 

[JEREMY HAWKE]

If I was in the unfortunate position to have cash but not able to get a mortgage
I would buy some land and live in caravan as there is no way that I would pay a thousand pounds in rent each month

 

[tony84]

First thing - What HMRC needs and what a lender needs differ.
File the Self assessments and then you have your 2 years figures. That sorts one issue out.

You then need to look at a lender who uses the latest years figures by the sounds of it. Not so easy in the current climate but possible.

Transferring your shares over to your wife to then declare yourself as employed is mortgage fraud.

Speak to an experienced broker, let them guide you on what you need to do because you are not going to fit with the majority of lenders from what you say... We are swamped at the minute, literally we have a 2 week waiting list so im not on here touting for the business.

 

[billybob99]

Keep saving up cash.

Cash is king.

Don't fall into this mortgage paperwork BS - more hassle than its worth.

I haven't achieved anything in life but having a mortgage free house is the best thing that's ever happened.

 

[billybob99]

If I was in the unfortunate position to have cash but not able to get a mortgage
I would buy some land and live in caravan as there is no way that I would pay a thousand pounds in rent each month

I had a mate that rented a business room in a pretty decent hotel and paid 1 year upfront.

Was cheap af.

 

[Chris Ashdown]

Move to East Anglia outside of the cities or the North East and get great value for buying a house
see https://www.zoopla.co.uk/market/great-yarmouth/?q=Great Yarmouth, Norfolk

 

[DavidWH]

@DavidWH



We had an AIP, but they didn't ask those things at that time.

I'm assuming you had two years of SA302s?

Which lender?

I'm paid through PAYE, but they did ask for 2 years SA's, plus 2 years accounts.

Our mortgage broker arranged it with Accord.

We had to provide payslips etc, before the AIP, then they asked for further evidence before sending the offer.

 

[The Byre]

If I was in the unfortunate position to have cash but not able to get a mortgage
I would buy some land and live in caravan as there is no way that I would pay a thousand pounds in rent each month

This!

A young couple near us got the bottom of the garden from the wife's mother and bought a cheap static caravan and spent the next three years building their dream home there. The roof is now on and they hope to be able to move in by Christmas.