Looking to buy a resi but in a bit of a pickle

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    Looking to buy a resi but in a bit of a pickle

    Hi all,

    Was hoping for some advice, I'm currently employed and will be going self employed as of March 2021, I also have rental income and would be interested to buy about October 2021, how likely would this be considering I won't have completed 1 year of self employment and only have an employed tax return for the previous year (note I have owned my BTL for 3+ years)

    #2
    You should buy now whilst you still have a job and can prove your income to get a mortgage loan .

    Comment


      #3
      Hi Blinko
      Currently there are 14 lenders whose criteria accommodates self employed applications where there is one years accounts, however restrictions might be applied for the maximum LtV of between 75%/85%. Furthermore some insist that the accounts must be prepared by a. Suitably qualified accountant rather that self assessment and tax documents.The final condition relates to being offered “ Special Rates” for such applicant types meaning that the lenders best rates might not be available.
      Please note that unless the Buy to Lets are without a mortgage , many lenders choose to ignore the rental profit when assessing the mortgage affordability.

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        #4
        thanks for your thoughts guys unfortunately i would need lenders that would be ok with including my BTL income as it makes up roughly 50% of my total income

        I never understood why banks don't include rental income, eg what would happen if i had say 25k salary and 200k BTL income would they really ignore that BTL income, :-?

        Gordon - I'm on the furlough scheme at the moment , i've heard grim things about banks lending to people on this scheme :-/

        Comment


          #5
          Originally posted by blinko View Post
          I never understood why banks don't include rental income
          Because your tenants could stop paying their rent.

          Comment


            #6
            Originally posted by Mrs Mug View Post

            Because your tenants could stop paying their rent.
            like wise my business could take a down turn

            Comment


              #7
              That's why you take out mortgage insurance.

              Comment


                #8
                Originally posted by Mrs Mug View Post
                That's why you take out mortgage insurance.
                hhmmm how does this relate to my question......

                Comment


                  #9
                  Each lender has a different set of criteria for workers who are furloughed: in the main lenders will accept between 60% & 80% of the normal salary up to a specific amount normally £1850 , however some like Coventry and no longer accepting applications where the applicant is furloughed, a minority require a letter from the Employer confirming a guaranteed date when normal employment will resume.

                  If the right lender were sourced under this , there would be little chance of any element of rental profit being taken into consideration when assessing affordability.

                  I note your concerns that your income is 50% rental profit and the rest from employment , clearly this will create major challenges in meeting any lenders affordability assessment and if there are credit card/personal loans lurking in the background then getting approval is nigh impossible.

                  It is important to understand that lenders do want to lend but not where there is a perceived higher risk of the borrower struggling to meet mortgage payments when employment might be uncertain and rental arrears creating an extended void period. At the end of the day they are lending our own hard earned savings and if you were faced with the same financial data , would you be prepared to risk lending your money to such a person?

                  Comment


                    #10
                    thanks for your thoughts, so it seems like i've gotta sit it out and get that 1 year of self employed accounts first and then go back to market and hopefully find a lender who would take rental income into account too

                    Comment


                      #11
                      Blinko it isn’t as bleak as you fear , there are lenders who will accept such net rental income provided as I am sure it must be with yourself that you have the necessary tax returns/ tax calculations and Tax overviews for at least the last two/ three years together with evidenced bank statements for the last quarter. No one can predict lenders criteria in twelve months time .

                      Comment


                        #12
                        Originally posted by blinko View Post
                        I never understood why banks don't include rental income, eg what would happen if i had say 25k salary and 200k BTL income would they really ignore that BTL income, :-?
                        Straying a bit off topic perhaps but FWIW I tend to agree. Generally speaking, passive income seems more secure than income derived from having to get up every morning and go to work. (That said, it does of course depend on specifics. I would understand a lender being reluctant to rely on a single property/tenant.)
                        There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.

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