Question about mortgage application (when a sole trader)

[Morgan]

I've been self employed for 6 years now. I started running a service business and after about 18 months set up a internet shop that kind of went hand in hand with the service business. 18 months later I sold the service business and ran the online shop on it's own for a a couple of years. I then started another online shop (unrelated) and that did well that I sold the original shop. So now I have just one online shop (congrats if you're still with me!).

Throughout all that I've only ever had the one business account, and my account only submits the one set of accounts for me (Joe Bloggs T/A Business One, then it was Joe Bloggs T/A Business Two and finally Joe Bloggs T/A Business Three).

I've now been employed for 6 months and I'm wanting to apply for a mortgage. I want them to take into account my s/e income as that almost doubles my borrowing potential (and without it the mortgage they've offered is too small for me to buy a property). My question is will the bank care that the 6 years of s/e have gone in different directions and certainly the last 3 years of accounts will be actually based on business 2 and 3. I guess what I'm saying is I used to sell apples and now I sell oranges - do I have to declare that or anything to the bank? Presumably they only want the tax return as proof of income so won't know about the change of direction unless I tell them? I don't want to fall foul of any non-disclosure charge or anything?

Thanks!

 

[faradaykeynes]

as long as your tax return can support the profit figures bank should be OK to give mortgage, though not all lenders are keen on self employment.

 

[Morgan]

Thanks. No I realise they aren't mad keen on the self employed. Unfortunately my part time job isn't enough on it's own to get a mortgage big enough to be of any use so I need all the oomph I can get in terms of getting more borrowing power.

 

[faradaykeynes]

I suggest speak to a good mortgage advisor

 

[Morgan]

Thanks I have a good mortgage guy but he's not there over the weekend. I never thought to ask him if the change of direction would make a difference as it didn't occur to me when we were discussing figures.

 

[Retired_Accountant]

Just tell them you have income from self employment as well as from employment, and refer them to your accountant. Normally they will want an SA300 from HMRC (which your accountant shouild have on file).
That lists your taxable income for the year from all sources, and tax due, and as it's issued by HMRC banks consider it good evidence of income.

 

[Morgan]

Just tell them you have income from self employment as well as from employment, and refer them to your accountant. Normally they will want an SA300 from HMRC (which your accountant shouild have on file).
That lists your taxable income for the year from all sources, and tax due, and as it's issued by HMRC banks consider it good evidence of income.

Thanks RA - won't they want me to go into greater detail like when this current business was established etc? Or will just the fact that I have 6 years trading accounts be enough ie they'll just ask to see the last 3 years SA300?

 

[tony84]

The lender probably wont go into too much detail about your business, they will just ask what you do.

They will want to see the last 3 years worth of accounts or SA302s (self assesment tax returns). Providing the figures stack up and there are no dips in your income there shouldnt be an issue.

Also depending on your deposit (percentage wise) some lenders will only want 1 or 2 years accounts and not 3.

 

[Morgan]

The lender probably wont go into too much detail about your business, they will just ask what you do.

They will want to see the last 3 years worth of accounts or SA302s (self assesment tax returns). Providing the figures stack up and there are no dips in your income there shouldnt be an issue.

Also depending on your deposit (percentage wise) some lenders will only want 1 or 2 years accounts and not 3.

Thanks Tony

The year before last was a dip as I had a baby and put the business on hold and let it tick over. No loss but no profit either. Well £75 trading profit if memory serves This year and the year previous to the baby were fine though. I'd be looking at putting down roughly 50% deposit.

 

[tony84]

In that case i would be looking at lenders who only need 1 years worth of accounts.

Dips in income are frowned upon unless there is good reason - good reasons are things like using company profits to purchase say a new vehicle or equipment...not taking a year out.

Personally i totally see your side of it and im sure many people would but from a companies point of view theyre lending a lot of money so they want to be sure they will get it back

 

[Matt1959]

we remortaged about 18mths ago and I went down the route of IFAs. Then I went to my bank Nat West and they gave me far far more than any IFA could suggest. I do have a solid banking history though dont earn much! Also, we have alot of equity. The point I am making is High St banks will lend if their boxes are ticked and I rather came away with the impression that they or Nat West at least can offer something they almost shouldnt if you fulfil their criteria - long banking history, no defaults ever, good equity.