Regulation in the finance world is ever increasing and this can make obtaining a mortgage a challenging, stressful and time consuming process. In addition, with the uncertainty following BREXIT looming, there is the added question of just how long the UK’s interest rates will remain low. With these factors in mind, it’s always advisable to seek professional, bespoke and qualified advice before hopping onto or even up the property ladder.
The key to getting a competitive deal on a mortgage – and that means the most flexible option, as well as the cheapest – is being armed with as much information as possible. Here are some key points that might help you along the way…..
I’ve recently qualified and am working in my first year as a foundation dentist – do I need to provide a mortgage lender with a minimum of 2 years accounts?
Generally speaking this is true if you are self-employed. However, as a qualified dentist it is possible to arrange a mortgage in advance of actually starting to work as an associate, as long as you can provide suitable supporting confirmations. With as little as a 10% deposit, lending can be based on your new proposed self employed income, at very competitive rates.
What happens if there’s a variation between Sole Trader Accounts and HMRC SA302’s?
Regular mortgage underwriting will likely take issue if your accounts and SA302’s do not match. This may be due to taking advantage of tax breaks set by the Chancellor – for example 100% deductions for capital allowances. However, lending can be agreed on the pre-deduction figures with suitable explanations.
I’m trading as a limited company – will this affect my level of borrowing?
The majority of lenders will lend against an average of your latest two years salary and dividends. However, in some cases it may be more beneficial to lend against your latest years if this is higher.
Alternatively, if your salary and dividends do not present very favourably, then you may still be able to achieve increased borrowing by lending against your most recent year’s Share of Net Profit, after corporation tax and adding in your salary.
How many times my income can I borrow?
You may well have heard that 4x is the general multiplier the majority of lenders go by. In actual fact, nowadays the majority of lenders will use affordability calculations to work out levels of borrowing. These take into account a detailed breakdown of your cost of living and existing commitments. So, depending on your status and credit score, lender’s affordability calculations could equate to between 4 to 5.5x income, although your individual circumstances could mean it’s actually less.
Will I get a mortgage if I’m joining a practice as a partner but haven’t started yet?
Of course. Mortgage lending can be agreed with the support of a reference from the practice partner, even if you’ve not actually been employed yet at the practice.
Is it a good time to review a buy-to-let portfolio?
If you have buy to lets already, then yes now is a good time to review the structure of your portfolio. It’s always advisable to seek the professional advice of your tax specialist/accountant and a mortgage advisor, particularly with regard to the tax changes coming in to place from April 2017.
And one thing that we have seen an increased demand for recently is the transfer of private ownership of a buy to let into a limited company. This aims to make the portfolio more tax efficient over the long term, but again, always seek expert advice before making any decisions.
Can I remortgage my current home and use the funds to buy another property?
If you currently own a home and you would like to keep it and rent it out, it may be possible to remortgage this property on a buy to let mortgage arrangement. This will potentially give you the ability to release equity from the property and use these funds to cover the cost of a deposit and any associated costs for another residential purchase. Please bear in mind though that as you would not be selling a residential property you would incur an additional 3% stamp duty on any new residential purchase and this cost will need to be factored in to the long term plans for your property portfolio.
All in all, getting a mortgage is a big decision and our advice is simple….be prepared and always seek the advice of an expert.
If you would like advice on securing a new mortgage or reviewing an existing mortgage arrangement, please contact us on 0330 088 11 57 or email [email protected]
A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
About the author
Julie-Ann Hawkins is a CeMap qualifed Mortgage Advisor and Director at FTA Mortgages Limited, who specialise in advising on & arranging bespoke mortgages for healthcare professionals http://www.ftafinance.co.uk/mortgages/
(*content written Dec 2016)