Mortgage application for future self employed

[H Beag]

Good Morning
I am planning on Leaving work to set up a new business in the new year. Problem is, I know that banks treat Self employed people differently for mortgage applications, Which is fair enough.

We are currently selling up and plan on getting another house in the near future, when a suitable property is bought. We have apporval in principle at the minute but need to sell our own place first which should be interesting in this current climate. the plan is to sell first before we bid on another house, not to be involved in a chain.

However I Dont want to delay business launch if i dont have to. I.e if it takes longer to get the house.

Just wondering if anyone has any advice? how do i approach this?

Thanks

 

[robd]

My understanding of self employed mortgages is that you have to submit either a delcaration of earnings from your accountant of 3 years of accounts from accountant. It used to be 3 years of audited accounts so I don't know if the declaration of earnings would be sufficient in the current market.

Generally if you change jobs (to another permanent job) you have to wait at least 6 months (till end of probationary) period before you will be given a mortgage. The longer you are in a job the better standing you have. I would think that just started off in self employment would make it harder.

I reckon you may be shooting yourself in the foot with becoming self employed before you get your new mortgage. It might mean you have to get a mortgage from a Sub Prime lender who wil charge 2%+ more than a normal lender which will make repayments very high.

Your best bet for a defnitive answer would be to contact a few mortgage brokers based on being selft employed from today and see what they say or can come up with.

 

[H Beag]

Thanks for that will contact brokers as advised.
might as well hold off and get the mortgage first, I have enough saevd to cover a mortgage for a year or so anyway.

 

[Dave Vanian]

The reason why it's difficult to get a mortgage when you're only recently self-employed is that a high percentage of new businesses fail within the first two to three years.

I'm sure you know what you're doing and wish you the best of luck with it, but just stop and think if your new mortgage is substantially bigger than your old. Do you HAVE to get the bigger mortgage and set up a new business within months of each other?

 

[PM1234]

The lender will usually ask to see ideally the last two/three years accounts. However if you haven't been trading for that time - they may ask for the last three months or however long you've been trading (the longer the better) plus projections for the next 12 months. They will also take other lending criteria into account e.g. whether you are an existing customer, savings, LTV, if you are a professional, your previous income, can they reasonably assume you can return to a similar salary range should the new business fail, etc etc.

They won't necessarily disregard the application merely because you have a new business.

As another poster pointed out there are sub prime lenders who will offer a higher interest rate and will potentially lend more. There is an option of proving your repayment capacity and trying to transfer to one of the high street lenders after one year.

You will need to shop around to see whats available to you. As said above do you really want to put additional pressure on yourself when you are just launching a new business?