Thank you for getting in touch. Here is a video you might find helpful in answering your question.
On the face of it there is nothing wrong with your wife applying as she is employed. We can let you know how the mortgage affordability works on this basis.
In terms of your situation, the good news is you shouldn't have to wait for the two years. There are lenders who will consider lending once you have completed a full year self employment, which means potentially you are not far away from being able to get a mortgage.
However, although some lenders are okay with just one year self-employment, some lenders need you to have been trading for a full tax year. The rules for contractors can be different again and it can make a difference depending on your experience and the industry you work in!
So depending on your exact circumstances its always best to speak to one of our experienced advisors who will be able to guide you. Lending rules are always changing, so its always best to find out before you do anything.
Don't worry you aren't alone in not knowing what an SA302 is. The easiest way to describe an SA302 is that it's a bit like a P60 for the self employed. However unlike those who are employed who get given their P60 each year by their employer, the SA302 has to be either requested from HMRC or you can now download it from the HMRC website by registering your details.
The SA302 shows your income for the year and the amount of tax you pay. It's a document that a lot of self employed people won't have unless they go out of their way to get it, but it is a document a lot of lenders use to assess your income.
However not all lenders use SA302's, some want these and your accounts, while others maybe happy to consider one instead of the other. It may seem strange but knowing how your case is best presented and with which documents can really help your application.
We always advise clients to speak to an independent adviser if they are self employed as it can be complex and understanding how a lender will assess your income and what they will look at is critical for the success of any mortgage application.
The full answer is below, but here is a little video which talks about Gross and Net Profit to help you understand what mortgage lenders use for sole traders and partnerships.
The assessment of self employed income can be complex and varies from one lender to another.
The first point to be aware is that some lenders will take an average over a period of time (usually 2 years) while others are happy to look at the latest years, but even this can have caveats with it depending on the lender. Because of this it can mean what you can do, can look very different from one lender to the next.
As I don't know whether you are a sole trader, partnership or limited company, I will try and give you an overview of them all:
In many respects this is a little easier as lenders will base your borrowing capacity on your net profit (not gross profit).
However be aware that any debts you take on for the business will likely be in your individual name and this could have an impact on your borrowing. It is very likely a lender will assess this as a personal debt, even though it’s for the business. In some instances we have managed to evidence and provided an argument to a lender that this debt was a business debt not a personal one, but it’s not always possible.
When it comes to establishing your borrowing, again each lender will view it slightly differently. Some lenders will look at your salary and dividends, others will look at your salary and net profit before tax, salary and net profit after tax, and others will also want to closely look at your balance sheet to ensure this hasn't been negative in the last 2 years. With limited companies it can get complicated and it’s very easy to find the wrong lender!
For anyone who is self employed our biggest bit of advice is to build a strong relationship with a good mortgage broker who will be able to advise you not just now, but also moving forward, much in the same way as you work closely with your accountant. When it comes to getting a mortgage it pays to plan ahead as your actions now could have an impact in the future.
Can you let us know if you are a sole trader, partnership or a director of a limited company?
Unfortunately lenders don't use your turnover to assess your borrowing. Instead lenders use different things depending on the structure of the business.
For sole traders/partnerships lenders look at your net profit. This is the figure after all your costs to run the business.
Some lenders who look at limited companies will assess your borrowing based on your salary and dividends. While others will consider salary plus net profit (before or after tax). But it can get even more complex than this too!
There are a lot of complexities when it comes to assessing someone’s self employed income and it is vital to get this right, particularly as every lender will look at things slightly differently.
Some lenders will also consider your borrowing based on the latest years accounts, while others will look at an average. All of this can have a big impact in terms of your borrowing.
If you are self employed we always advise people to speak to a member of our team who will be able to help find the right lender for you.
The short answer is yes, there is a strong possibility you can get a mortgage as you have 12 months experience and you have an extension to this contract. Of course without knowing your full circumstances, we can't say it will definitely happen.
As a contractor it can be more difficult to get a mortgage, however there are lenders who are more favourable to contractors, than others and the rules vary hugely.
We always advise people looking to get a contractor mortgage to speak to one of our mortgage advisers as the rules do change and they will be able to tell you what you can do.
As you have lots of questions it might be best to speak to one of our mortgage brokers who will be able to look into your options in more detail.
However to try and answer your questions lets look at the first one:
Can I remortgage my flat to raise a deposit for another property?
The short answer is yes. Assuming the bigger property is going to be your home, you can let out your flat when you move out. To raise a deposit on your flat will require a 'let to buy mortgage'. The amount you can raise will be dependent on the potential rental figure, so maybe you could let us know what you think your flat would let for?
Is it best to sell?
This depends on many factors, such as your desire to keep the flat, whather you think it is a good investment, the speed at which you want to buy and much more. Again it would be best to speak to an adviser so they can help talk through the options with you.
In terms of your income and assuming you have no debts you will be able to get close to the borrowing level you will need to buy the property. The key will be the size of the deposit. Selling or keeping the flat will likely dictate how much you have to play with.
If you would like to have a chat with an advisor, please let us know and we will be more than happy to help out.
The very nature of the mortgage is unregulated just like a buy to let mortgage compared to a residential mortgage (which is regulated). So in that respect they are not different.
Where they are different is who the lender is going to be and how they treat it. Some holiday let lenders will treat the holiday let in much the same way as a buy to let within their internal process and procedures.
Other lenders will treat the holiday let property as a commercial proposition.
What often dictates using one lender instead of another, is usually the clients individual circumstances, the property, and what the clients plans for the property are (for example; are they going to use it themselves or is it purely a business).
If you would like to discuss further, please get in touch with one of our mortgage advisers.
Typically the more you can put down the better and the stronger your case will be considered. Its easy to say you'll need at least a 25% deposit (as this is the minimum) however depending on your experience, your personal circumstances, the property and the income that it will generate, the amount you will need to put down could vary hugely from this figure. Also there are some lenders who will not even consider you unless you put down 40-50% deposit.
Please feel free to reach out to us if you need any help.
The vast majority of mortgage lenders would not lend on a holiday park, however it is sometimes possible to look at alternative finance solutions for holiday parks.
It will also come down to what exactly the proposition is and the circumstances of the client.
If someone is looking to buy a lodge on a holiday park to holiday let as a business, then this is a good starting point. If that person was also an experienced landlord with a portfolio of buy to lets and holiday lets then this would strengthen a case.
If you would like to discusss what you are hoping to do with one of advisors, they will be more than happy to help.
Yes, but as rates and lenders criteria change this might not always be the case. Sometimes it’s not possible to choose one lender over another, as usually it’s the client’s circumstances that dictate the best option for them. This is usually based on their circumstances, what they are buying and their plans.
If you would like to discuss your own situation with one of our team, they will be happy to chat through your plans.
If the property can only be used as a holiday let and not allowed to be someone's main residence, the short answer is yes there are lenders who will be okay with this. It will come down to the individual circumstances of the client and the quality of the property, but it is certainly something some lenders will consider.
If you are selling and wanting to move you do have the headache of having to sell and then being in a chain hoping that it all goes through smoothly! Of course we know this doesn't always happen.
The good news is that there are solutions which means you don't have to sell first or even find a buyer first. Depending on your exact circumstances will likely dictate the best course of action, but a couple of solutions could be a let to buy mortgage which if you need to raise a deposit for your onward purchase will allow you to do this. This will mean instead of selling your home, you will keep it and rent it to tenants. Of course there is nothing stopping you selling at a later date.
Another potential solution if you don't want to let your property is to get a short term (usually 12 months) bridging loan. A bridging loan is just like a mortgage, but designed for these types of scenarios (and there are others). The cost of bridging finance is also a lot cheaper than it once was and can be a very quick and fast solution. This will enable you to purchase the property and sell at a later date with out the risk of losing your dream home.
With all these options it can be a complex process because you have multiple transactions designed to achieve one goal. Because of this it is really important to seek professional advice and we would strongly recommend speaking to one of our experienced independent mortgage brokers.
This will be dependent on the value of your home, whether you currently have a mortgage or not, the size of the mortgage, the potential rental figure the property will achieve and your personal circumstances.
An example could look like this:
Home valued £400,000, mortgage £220,000, potential rent will be £1,500. In this scenario the client could borrow a total of £262,295 and therefore release £42,295 (£262,295 - £220,000) for a deposit for their onward purchase.
Of course if the client had a small mortgage or none at all, the amount they could release will be much more.
Please note lending rules change all the time, so this example is only that, an example.
The let to buy scenario can be very complex, so we strongly suggest you get in touch with one of our experienced independent mortgage brokers.
Not wishing to sit on the fence but it is important you are aware every lender has different rules and as it is intrinsically linked to another purchase (which may also need a mortgage) it is therefore more complicated and costly mistakes can easily happen.
However there are some broad criteria themes;
1) the amount you can release for a deposit will be dependent on the potential rental figure your property can achieve.
2) The assessment of borrowing against rent is sometimes based on a notional rate over a certain percentage, both of which can vary from lender to lender.
3) Maximum LTV (loan to value) is usually 75%.
4) The maximum age at application has to be before someone's 70th birthday, but again this can vary from lender to lender and like all lending rules can change.
5) You must have owned your home for a reasonable minimum period (6+ months).
6) the transaction has to be simultaneous with your onward purchase.
7) If you are getting a residential mortgage for your onward purchase it is highly likely you will need to evidence a copy of the mortgage offer.
8) Is it plausible, does it make sense? In other words does the scenario feel right! Lenders will do a sniff test!!
This scenario can be very complex, so we strongly advise to seek independent mortgage advice. Please feel free to reach out to us if you need any help.
Without knowing some more specifics of your financial position and how much your parents are able to help with, it is not possible to be definitive, however broadly speaking this is something that you can certainly do, but your borrowing capacity will be dictated by your income and outgoings.
To get a clear idea of the maximum you can borrow for a first time buyer mortgage it might be a good idea to speak to one of our mortgage brokers who will be able to find the lender who can offer you the maximum amount. In addition it would be helpful to know exactly how much of a deposit your parents can help with. As the mortgage deposit together with your borrowing deposit will dictate what you can buy.
Depending on your exact circumstances, here is a list of things that you will or very likely to have to pay. I have also provided you with an approximate price range but it is a rough guide and like anything you sometimes get what you pay for:
• Solicitors fees (£350-£1,000 approx.)
• Mortgage Broker Fees (£400-£1,000 approx.)
• Searches (£30-£500 approx.) - different searches are undertaken so depending what these are will determine the cost.
• Stamp duty (visit HMRC to get an idea of cost here as it depends on the purchase price).
• Valuation fee (£0-£1,000) - price dependent on the type of survey you have and whether the lender offers a free one).
• Mortgage Lender fee (£0-£2,000+) - every lender has a different pricing model and to find a lender who is the cheapest is important and one of our advisors will be able to advise you which one is best).
• Removals (£500 - £1500+) - assuming you don't do it yourself.
• Home insurance (this has to be in place for when you exchange contracts, NOT when you complete).
There are a lot of costs involved when buying a home for the first time and if you are selling as well there are also estate agents fees to consider.
However with some good management and help from a good mortgage broker we can help guide you down this path and help minimise the costs by getting the cheapest and best mortgage for you. We can also let you know which solicitors are good and a reasonable cost.
The potential difficulty with either gifting or lending your brother the money to buy your property is it is likely to be considered as a vendor gifted deposit and some lenders won't like this. However the good news is that some lenders are okay with this. If your brother is looking to get a first time buyer mortgage it would be advisable for him to speak to an independent mortgage advisor.
This is quite a big question to answer as there are two distinct parts 1) which type of investment property is better and 2) the different types of mortgages. I'll start by answering which type of property investment might be best:
Knowing whether a holiday let or a buy to let is a better investment will come down to the type of property you want to buy, the location and how much work you are willing to put into it and your personal circumstances.
There are also now new rules which have come into force relating to portfolio landlords which has to be taken into account.
It’s important to be aware if you have a buy to let mortgage and you are thinking or holiday letting or putting it on Airbnb, you must always check the terms of your existing mortgage offer. Most buy to let mortgages will state you can only let the property on an assured shorthold tenancy and if it does you could be in breach of your mortgage conditions.
In terms of the differences in the types of mortgages between buy to let and holiday let they are very different. The difference is both in cost and lending criteria.
In terms of cost holiday let mortgages tend to be slightly more than buy to lets, but interest rates change all the time, so what is correct now could be very different tomorrow.
In terms of criteria lenders look at the income a property will generate slightly differently with holiday lets as they assess it over the course of a year, taking into account fluctuations of income throughout the year.
Holiday let income can also be assessed differently depending on whether it is an existing business or a new one, so this is something else to keep an eye out for.
It is important to be aware that every lender has their own little quirks and lending rules which can change over time. When it comes to knowing your options, we always suggest its best to seek independent advice from one of our team.
Please take a look at the blog our owner has written or visit the YouTube channel as he talks about some of these questions around holiday lets and buy to lets.
Thank you for asking a question. This is something a lot of parents often ask when they are looking to help their children get on the property ladder.
If you don't take the appropriate action and safe guards, then yes there is the potential that if their relationship broke down you might not get the money you had intended for your son. However the good news there are options, but we would also advise to call one of our experienced team to discuss:
One solutions could be for your son and partner to purchase the property as tenants in common and proportionate the percentage ownership between the two.
Some lenders will allow you to help with a deposit which is held in a sub account for a period of time which you have full ownership of but this would require your son and his partner to find at least some deposit on their own (even if its small).
You could make a formal loan to your son and his partner which is secured against the property and is repayable on the sale of the property.
A declaration of trust can also be used to protect your money that your son and his partner will sign. This is something your solicitor will be able to advise on.
It is usually a good idea to speak to an adviser so they can fully understand your circumstances and work out the best option for you.
Of course we can't say you will be successful, but the fact you have only been in a job for a short time, doesn't in itself cause an issue. In fact some lenders will consider before you even start a job, provided a contract or job offer letter can be provided.
However like all these things, lending rules do and can change, so we always advise people to speak to one of our team to discuss their options.
It really depends what you are looking to do! But please note that lending criteria/rules change all the time, but right now here is a guide:
If you are buying a residential property the minimum deposit is 5% however lending criteria is very tight at this level because the risk to the lender is greater. We have had clients struggle to pass at this level because credit scoring is very tough. One tip would be to always ensure you are on the electoral register and have a good track record of managing debt.
If you are buying a Buy to let property for most investors the minimum deposit is 25%, however for more experienced investors it is possible to get away with 15-20% deposits. However when it comes to Buy to let mortgages, the deposit is only one factor. The other major consideration is the rental income. If the rental income is not sufficient, then usually a bigger deposit is required.
For holiday let mortgages, the minimum deposit is 25% but again this is also affected by the rental income that is achievable.
Whatever you are looking to do, we always suggest to seek independent advice as there are always lots of complexities and lending rules change. If you would like to speak to one of our team, please feel free to get in touch and we will happily discuss your options with you.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT.
Barr Financial is a trading name of Benjamin Parry who is authorised and regulated by the Financial Conduct Authority. Our FCA Number is 506976. The FCA does not regulate some investment mortgage contracts.
Barr Financial are also members of the NACFB (National Association of Commercial Finance Brokers). The Commercial Mortgage Sector is currently a non-regulated activity, as defined by the FCA. Therefore client protection is limited. The only recognised body is the National Association of Commercial Finance Brokers. The NACFB has established complaints and disciplinary procedures designed to eliminate unacceptable working practices amongst its members and Barr Financial subscribe to their standards.