easier to get a mortgage as a sole trader or employee?

lola_run

I run my own business and have several different clients (in public and private sector), some of whom guarantee me a regular monthly income and others which do not.

I am interested in buying a first property, not necessarily in Ireland though, and was wondering how easy it is to get a mortgage from a financial institution in Ireland when one is not a salaried employee.

I was considering working as an employee for 3-6 months, which would guarantee me an excellent (perhaps 500 euro more than what I currently earn) and regular salary in order to get a higher mortgage loan.

However, I would lose some of my clients if I did so, but I'd also be able to keep some of them (whose work I can do at nights or weekends). Is it a definite advantage having an employee status for getting a mortgage? (Although my parents would be willing to sign a guarantee, I'd prefer to be independent on this one)

Obviously, I want to get the best deal. I'm looking to buy an apartment that is about 50-70m2, as I said not necessarily in Ireland, although I plan to get my mortgage from an Irish financial institution.

I'm kind of weighing up the pros and cons, and would like to hear from any bank/mortgage professionals out there (please feel free to pm me if you wish) what the best option would be, or indeed anyone who has found themselves in a similar situation.

Thank you.

PS. I'm single and have no kids.

Victor

If you are a sole trader and can show a few years accounts, there shouldn't be any problem.

lola_run

Victor wrote:

If you are a sole trader and can show a few years accounts, there shouldn't be any problem.

No, I can't show a few years' accounts, I can't even show one year. I only started up business in October 2006!

johnnyskeleton

If you go into a bank and explain your situation frankly - outlining the risks/potential gains of your business, they should tell you straight out what they think. Being self employed and having, as Victor said, a few years of accounts (which show a clear profit and that your taxes are up to date), might make you more attractive to them.

johnnyskeleton

lola_run wrote:

No, I can't show a few years' accounts, I can't even show one year. I only started up business in October 2006!

I think that whether you are self-employed or are a PAYE worker, you will still have to show them that you have made an income in the last few years, either by accounts or by a P45/P60.

The nature of your business may affect their attitude; for example if you are a professional or specialised tradesperson that might stand to you.

lola_run

johnnyskeleton wrote:

I think that whether you are self-employed or are a PAYE worker, you will still have to show them that you have made an income in the last few years, either by accounts or by a P45/P60.

The nature of your business may affect their attitude; for example if you are a professional or specialised tradesperson that might stand to you.

For the last few years??? I thought one only had to show income for the last three months to get a mortgage? How many months/years of income proof do Irish financial instutions who give mortages normally require?

My French bank only requires three months! However, I'd prefer to do all these dealings through English. But if I need to prove years of incomes, I'll go and get a mortgage from my French bank!

The_Conductor

johnnyskeleton wrote:

I think that whether you are self-employed or are a PAYE worker, you will still have to show them that you have made an income in the last few years, either by accounts or by a P45/P60.

The nature of your business may affect their attitude; for example if you are a professional or specialised tradesperson that might stand to you.

If you're permanently employed and have been in your current job for over 2 years (as opposed to on a fixed term contract) your last P60 along with a note from Personnel stating that you are permanent along with a copy of a salary scale (if on a salary scale) will normally suffice.

If you are self-employed, a C2 clearance certificate along with 2 years accounts are normally required.

As a self-employed person you may be perceived as a greater risk to the bank and consequently charged a higher rate.

Shop around!

antoinolachtnai

In practice, you can only get a mortgage on property from a bank in the country where that property is situated.

johnnyskeleton

smccarrick wrote:

As a self-employed person you may be perceived as a greater risk to the bank and consequently charged a higher rate.

On the other hand, if you are in a trade/profession which has the potential to earn massive money, but at the moment you are just building up your business, they might be more willing to lend more than they would to a PAYE employee.

lola_run

antoinolachtnai wrote:

In practice, you can only get a mortgage on property from a bank in the country where that property is situated.

Oh, really? That's news to me! Where exactly is that piece of legislation do you know?

antoinolachtnai

It's not a piece of legislation. As far as legislation goes, banks can legally accept property anywhere they like as security.

It's a practical reality of running a bank. How would the bank know if it had a sound mortgage on a property in France, say, without having to engage a load of French lawyers and set up all the bureaucracy to deal with French property law? How would the bank value the property? What would it do in case of a foreclosure?

Of course, if you own a house in Ireland outright, there is nothing to stop you raising a mortgage on that house in Ireland from a bank in Ireland and then using the money to buy a property in France. I take it that that is not your situation though.

lola_run

antoinolachtnai wrote:

It's not a piece of legislation. As far as legislation goes, banks can legally accept property anywhere they like as security.

It's a practical reality of running a bank. How would the bank know if it had a sound mortgage on a property in France, say, without having to engage a load of French lawyers and set up all the bureaucracy to deal with French property law? How would the bank value the property? What would it do in case of a foreclosure?

What do you mean by a sound mortgage? Why would the bank need to value the property (surely it is the person or agency selling the property gives its price and that's it)?

I thought all mortgage lenders cared about was how much you can afford to pay back each month.

johnnyskeleton

lola_run wrote:

What do you mean by a sound mortgage? Why would the bank need to value the property (surely it is the person or agency selling the property gives its price and that's it)?

I thought all mortgage lenders cared about was how much you can afford to pay back each month.

They care quite a lot about the value of the property. They wouldn't lend you 500k on a property worth 200k because if you failed to pay them they would loose 300k. Otherwise, they may as well give you an unsecured personal loan of 500k and hope that you pay them back.

lola_run

johnnyskeleton wrote:

They care quite a lot about the value of the property. They wouldn't lend you 500k on a property worth 200k because if you failed to pay them they would loose 300k. Otherwise, they may as well give you an unsecured personal loan of 500k and hope that you pay them back.

Well, of course, but neither would a bank in another country! I don't quite get your point. If I show the relevant papers stating the cost of the property, as I would have to do for an Irish property, I imagine, what is the difference? Is this the EU or what?

antoinolachtnai

A homeloan is also called a 'mortgage'. Really, the loan itself isn't the mortgage - the mortgage is actually the right that you give to the bank to repossess the property and sell it if you aren't able to make the repayments. See http://en.wikipedia.org/wiki/Mortgage

The bank doesn't give a damn about the cost of the property. What they care about is what happens if they have to have the property sold to get their money. If it turns out that they don't have a proper mortgage, that the property is unsaleable, or that the title is defective, they won't be able to get their money back, so the bank needs to be reasonably certain that these things are in place. Even without it coming to foreclosure, if the bank for some reason didn't apply those formalities, it wouldn't be in a position to sell on the loan to another institution because it wouldn't have proper security.

From a bank's point of view, a valuation from a valuer it doesn't know in another country is basically worthless. The bank has no recourse against him if it all goes wrong.

Every country in the EU has different procedures for conveyancing (as they do for most things) and the rights of mortgagees (i.e., banks) are also different.

johnnyskeleton

lola_run wrote:

Well, of course, but neither would a bank in another country! I don't quite get your point. If I show the relevant papers stating the cost of the property, as I would have to do for an Irish property, I imagine, what is the difference? Is this the EU or what?

In addition to antoinolachtnai's comments, a bank wouldn't accept what you are paying for a property as it's value without verifying this. You could have offered too much for the house, or there could be some dodgy dealings. Some properties which are touted as "overseas investment properties" are sold at a premium to novice investors.

Also, the bank want the house to have been surveyed by a qualified surveyor and they don't want any nasty surprises such as the house being unfit for human habitation.

lola_run

johnnyskeleton wrote:

In addition to antoinolachtnai's comments, a bank wouldn't accept what you are paying for a property as it's value without verifying this. You could have offered too much for the house, or there could be some dodgy dealings. Some properties which are touted as "overseas investment properties" are sold at a premium to novice investors.

Also, the bank want the house to have been surveyed by a qualified surveyor and they don't want any nasty surprises such as the house being unfit for human habitation.

Oh, **** it then! It all seems so complicated. i'll just continue renting and wait for my inheritance. Less stress! ;-)

antoinolachtnai

No, don't do that ... try approaching a French lender if you are planning on buying in France. It all seems complicated, but give it a go.

The_Conductor

Or a Portuguese lender to buy a property in Portugal etc.
They (the foreign lender) will probably need the same proof of income etc. that an Irish lender would need, to satisfy themselves of your ability to service the mortgage.

Its not that difficult in all honesty- in practice though when buying abroad you will most probably have to give power of attorney to a local lawyer/solicitor to act on your behalf, as you obviously will not be there a lot of the time. So- you would need to be able to find a trustworthy solicitor, preferably one with a decent grasp of English or French.

S.

lola_run

smccarrick wrote:

Or a Portuguese lender to buy a property in Portugal etc.
They (the foreign lender) will probably need the same proof of income etc. that an Irish lender would need, to satisfy themselves of your ability to service the mortgage.

Its not that difficult in all honesty- in practice though when buying abroad you will most probably have to give power of attorney to a local lawyer/solicitor to act on your behalf, as you obviously will not be there a lot of the time. So- you would need to be able to find a trustworthy solicitor, preferably one with a decent grasp of English or French.

S.

Well, it will actually be my primary residence so I'd be there most of the year and I speak fluent French.

undecided

I know some one who did this recently just got an accountants reort and showed bank statements for the last few months