I recently secured a let to buy self employed mortgage for a client.
My client in this instance owned a large property in North London. This was his main residence. He was looking to buy a second property to move into, but was reluctant to sell as he felt his current home was likely to appreciate dramatically over the next few years. He therefore wanted a let to buy mortgage to enable him to buy without selling.
There wasn’t a huge amount of equity in his current residence, and he needed to borrow a large amount against the property in order to pay the deposit. The amount he was trying to raise was around five times more than his income over the past year.
My client was a musician by trade, and his income was structured through a limited company. When conducting their affordability checks on self employed borrowers, the majority of lenders take an average profit figure over the last three years. His income, however, had increased dramatically of late, with his latest profit figure being the best part of a 100% increase on the previous year’s. This meant we needed to find a lender who would be happy to take only last year’s numbers in order to raise the amount he needed. The lender would have to feel comfortable that he could maintain that level of income.
Lenders’ criteria vary hugely, but most will ask for either salary and dividends, or the net profit of the company. In this case, we needed a lender who would take both his salary and the net profit into account.
There was an additional complication with his income; as he travelled a lot for work, some of his income came in the form of foreign currency and was not paid into the UK or through his company. We needed this portion to be taken into account as well.
The house he was looking to purchase had recently been renovated, and a third bedroom added. The surveyor, however, had valued it as just a two-bed property. We therefore provided the valuation which allowed him to negotiate the purchase price down by £10,000.
All of these factors meant that there were only a handful of lenders who would consider his case.