If I start a business will it affect my ability to get a mortgage?

lightoffshore

Hello Everyone,

I'm in my early thirties, lots of high-tech qualifications and work in the medical devices industry in Dublin.

I'm looking at starting a medical device business. It will probably spin out in 2014 and I will have a contract until then in a university (will be working on the technology in the university in the meantime). The business, a limited company, will probably be venture capital backed and I will be a founder/director.

I don't expect to buy a house until around that 2014 or 2015. I could take another job in a company or start this business. If I can't get a mortgage I might have to skip doing my own start-up since this is important to my wife and I. Big decision and need to make it soon.

I can probably earn €55-65k if I go back to industry now. My wife is currently working on a short term contract (pharma) and will hopefully secure a more long term/permenant contract over the next year or so. She can probably earn 40k.

We have around 40k towards a deposit.

A few questions:

Will I be in a position to get a mortgage? I've heard that new business owners don't qualify for a few years. If so, how long?

Will our wages be combined for the assesment or will we have to rely on her salary?

Have you any idea how much we might qualify for in each scenario?

Thanks for reading, and thanks in advance for your responses!

offshore

riclad

if you are going for 2 person loan bank looks at both your incomes.
So it depends on the value of the house.
I think a bank looks at 2 or 3 years accounts for self employed business people.
Banks prefer people on long term contract re giving out mortgages.
MY Advice is go to a mortgage broker for advice.Your situation is complicated re future income.
Most business,s make only small profits the first 2 years .
you cant really be precise re whats my income in 3 years,unless you take the job.
The broker will give you advice for free ,re when can i get a mortgage,when will i qualify.
i would nt like to go to a bank,and say i might make x amount ,in 2 years
if i start a business ,banks go by accounts,income ratio etc
IF your wife was in a permanent job, she could go for a mortgage,
based on 40k,
savings, i earn x amount per year.
i think you need the advice of a good broker.

lightoffshore

Thanks Riclad. I should probably have mentioned, there will be no profit until year 5 or 6. This business will be mostly R&D and clinical trials until then. The model is that a major corporate will buy the technology and we'll all be rich! So basically no bananas for a few years, just reliance on venture capital until an exit.

riclad

You can still get a mortgage ,but it,,ll be mainly based on your wifes income,the broker might suggest can you get a gaurantor .I,d say you have to wait a year to get a loan,no harm in going to a broker now.
banks like to say ,your income is x ,we,ll lend you 80 percent loan based,say incomex4/5 eg income 40k, loan =180k approx.
They need to know x, so i think you,ll need a brokers help to get a loan,
unless you wanna wait 5 years .

killers1

lightoffshore wrote: »

Hello Everyone,

I'm in my early thirties, lots of high-tech qualifications and work in the medical devices industry in Dublin.

I'm looking at starting a medical device business. It will probably spin out in 2014 and I will have a contract until then in a university (will be working on the technology in the university in the meantime). The business, a limited company, will probably be venture capital backed and I will be a founder/director.

I don't expect to buy a house until around that 2014 or 2015. I could take another job in a company or start this business. If I can't get a mortgage I might have to skip doing my own start-up since this is important to my wife and I. Big decision and need to make it soon.

I can probably earn €55-65k if I go back to industry now. My wife is currently working on a short term contract (pharma) and will hopefully secure a more long term/permanent contract over the next year or so. She can probably earn 40k.

We have around 40k towards a deposit.

A few questions:

Will I be in a position to get a mortgage? I've heard that new business owners don't qualify for a few years. If so, how long?

Will our wages be combined for the assesment or will we have to rely on her salary?

Have you any idea how much we might qualify for in each scenario?

Thanks for reading, and thanks in advance for your responses!

offshore

You have a couple of different issues here...

If you start your own business you will need to have 2/3 years of consistent income behind you in order for your salary to be considered for a mortgage. By the sound of the time-frames involved this may not be a realistic option if you are looking to buy in a couple of years? The second issue is that your wife is also employed on a contract basis. This will make it virtually impossible for you both to get a mortgage if she is employed on a contract basis and you have just started a new business with no income coming in.

If your wife secures a permanent job earning €40k and you start your new business you could expect approval in the region of €180k.

If you go back to mainstream employment earning €65k and your wife remains on a contract basis and her salary is not factored into the equation by the banks you can expect to obtain circa €290k of a mortgage.

The mortgage figures quoted above are based on today's stressed interest rates and any increase in rates between now and when you apply will reduce the amount you would qualify to borrow.

Overall, the path you need to take depends on the loan amount you think you will need to borrow and then you can make the decisions regarding your employment paths accordingly.