Self Employed - Qualifying for a Mortgage

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cousin_borat

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If this should be in the askaboutbusiness forum then apologies.

I have recently started trading with my company which was formed last year. I left my last contract in October 2007 where I was working abroad as a contractor. I'm now based in Ireland. Hence no P60' for 06/07.

Status
Single, late twenties with another mortgage 150k with the ACC, parent as Guarantor. No other debts. Director of a Ltd company with myself as the sole full time employee and 6 contractors.

Seeking
Owner occupier. 2 bed appartment in Dublin. Circa 250-300k. I have 40k to put down in cash.

As a self employed individual I am paying myself a salary below the 21% Tax Band. Taking expenses, subsistence etc out of the company to supplement this.

My question is whether there is anyone else in a similar position. I.E. they have recently formed a company and are hobbled in terms of getting a mortgage? They are looking for at least a P60 showing 60k+ per annum. This is simple not efficient from a tax perspective.

What did you do? Are there other options? I really am not going to go to a sub prime lender. It's not all bad since I'm really maxing out my pension contributions through the company. However it is frustrating with the good value in appartments.
 
Unfortunately the banks will expect the loan repayment amount to come in at roughly 35-40% of your monthly disposable income. So, regardless of your employment situation, you will still need to show them evidence of a €60k salary regardless of how tax inefficient this is. Also, the fact that it's a relatively new business means you don't have any track record and the bank will not be too keen on this.

If you feel you could easily cope with a €250k mortgage on €35k salary plus expenses/subsistence then it may be a case of upping your salary to €60k temporarily to keep the bank happy and then reducing it once the loan is approved.

However, I recommend you think long and hard about this approach, as things could get very scary, very quickly, if you dropped to €35k and then business dried up. Probably not the best option to take.

Sorry I can't give you any advice on where to get a mortgage. I'm self employed myself but luckily got the mortgage just before leaving my job.
 
ClubMan said:
How will you claim owner occupier status if you are working abroad?
Click to expand...

"Have been" past tense. I live in Ireland since October 07. I was trying to put my situation in context, i.e. that I was working abroad for a few years as a contractor, hence no P60's for a number of years.

Reading about GE today in the Independent Business Section (http://www.independent.ie/business/irish/ge-money-halts-liars-loans-1374898.html) it seems like many people in my position went the "Liars Loan" route where company directors would self-certify their income. As I said already I didn't consider going down this type of sub prime route so it looks like a dead end.

What I still don't understand is that even three years down the line. I will have been paying myself 34,500 annum, maxing my pension contribution and expenses/subsistence. In this case I would not be eligible notwithstanding that fingers crossed I will have significant turnover and be liquid.

My question is what strategy should I be planning to get a mortgage to purchase?
 
Not quite. In that case it would make more sense to bite the bullet and rent long term, invest and max pension from my company rather than taking big tax hit and sacraficing future security in order to buy a house.
 
There is normally more than one way to skin a cat. You shouldn't necessarily rule out the option of higher salary. You should talk to your accountant about this and your other options. In the current climate and given your current situation you might prefer anyway to wait a while before committing yourself to a property purchase.
 
I read somewhere yesterday where GE Money were ceasing their 'self certifying income' mortgages which may have been an option for you.

I believe Start Mortgages still do this type of mortgage... at a cost...
 
I was in a very similar situation a few years back. Came back from abroad and set up a limited company.
Most banks i spoke to didn't want to know, but in the end I spoke to the bank where I had my long term personal account from years before I went abroad.
I put everything on the table in terms of exact figures of income, expenses, potential to pay bonus or commission at year end. I brought my business plan and cash flow projections, order book the lot. Then said I would give them my business account, life assurance policy to cover the mortgage, my whole life basically. They worked through it all with me and came up trumps in the end. It definitely took some time though, but it shows there is some slight room to manouvre on individual cases if you get the right person to push your case.
 
As AndyH pointed out your best bet may be at the bank where you have your business account. In the past I have been able to get very special deals on loans, mortgages etc. because the bank did not want to lose the business account.

However in the current climate things may still be difficult for your situation
 
Great advice everybody, it's all much appreciated. I read about GE, think I saw it in the Indo Business section.
 
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