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TL : DR - Is it easy to get a mortgage shortly after becoming self employed with own business? (Talking as little as months)
Myself and my partner are currently employed in jobs and we are looking to buy our first home this year (both first time buyers). However I am toying with the idea to open up my own business, but I do not want to do it before getting a house in case it means delaying the purchase for a few years whilst I get some income evidence together from the business (been told as little as 1 year's book keeping but some are up to 3 years?) We have a mortgage in principal together so we know how much we could borrow as of our circumstances right now.
Is leaving employment before getting a mortgage in place a good idea in my situation? Are there any smart ways to go about this? Ideally I'd like to get the ball rolling with a business ASAP, but it can hold off if I'd be better off.
you mention buying a home, rather than buying a BTL property, so I assume that your query relates to a residential purchase rather than a BTL purchase.
If you apply for a residential mortgage, there will be a question on the application form that says, along the lines of,"Are there any changes in circumstances expected in the foreseeable future?" The answer to that, quite clearly in your case is yes. So even if you buy before starting a business, you will need to declare it. This change was introduced several years ago, and it's really there to protect you. Running a business can be a tough course of action to take. There are no guarantees as far as income is concerned, and if you miss mortgage payments, you card will be marked for the future, and you may find it difficult to secure a mortgage.
Buy a residential property by all means, but don't rush into buying property just yet. Work hard to establish your business, and apply when you have at least two years accounts behind you. This will give you a wide choice of lenders at the best rates. Take that time too to save for as big a deposit as you can get. When you are secure, and only then, consider buying a home to live in.
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Advice given by propertytribe financial services is spot on. I was two years self employed before i got a mortgage out but my wife who was a joint applicant was employed. So it depends on which is most important to you really -- whether buying the home before the business or business before the home. It also depends on which exposes you to most financial risk. However you can get a mortgage if you a self employed but as stated by someone earlier you will need a few years of accounts to submit with your application as they need it as proof of your income. hope this helps
I tend to agree. Buying a property may appear a priority but you are swapping rent (ever increasing) for mortgage interest and ownership/maintenance. It's not a zero sum game but depending on your view depends on your preference.
running your business successfully will dictate what you can afford. Run it without the proper cash and you will struggle.
i suggest you delay the property purchase. If you make self employment a success then you will be earning more and can afford more. Not only that but the general view is property prices are stagnant to falling and not rising so biding your time may be beneficial anyway.
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)
And thanks for the responses so far.
Just a little more background which may clear things up. My partner and I, as mentioned before, are both first time buyers and our first purchase together will be our home, rather than a BLT of any sort. We are about ready to purchase said home henceforth I do not want to prolong this purchase by opening a business first, and having to wait a minimum of a year to get some income records.
We do not currently rent separately or together. We are both living with parents.
In regards to the first comment from the financial services, "Buy a residential property by all means, but don't rush into buying property just yet." This I will definitely be doing as advised. I want to get into property for the rest of my life, but I'm also eager to go from working a job to self employed ASAP and do something I really love.
I'd be much better off (Mentally anyway) to get my own business going (rather than working a job for the next 20 years), then start saving to get into property for the long run/retirement plan. Right?
So from what I've learnt, I should hold off on the business until I've got a home mortgage in place, but declare that I have plans for circumstances to change (explain what they are), Then once I'm comfortable, working on the business start up. Once I'm (hopefully) making good money, I can resume saving for BLT properties for the long term plan.