Self-employed, mortgage - any tips / advice?

mid30slady

So I am self employed and business doesn't show much profit. (I have successfully repaid a 90k business loan in 10 years).
I pay myself only €400 per week. I might look at increasing this to €500 for 6 months from January. I take out max €50/60 per week from that.
I have a business and personal bank account - no savings account.
I have currently about €10k in my current account. I have another €10k that I saved through the years (gave it as a loan to a family member and he has €9k and will have the €10k to repay in January) which I will lodge into the current account in January.
I will have another €20k to lodge by June next year, so by then will have €40k saved - possibly more and will have €5k for furniture etc.
Problem - my credit rating shows I didn't clear a credit card repayment years ago. I am paying it back to Cabot on a weekly basis so €1k left to repay.
I pay €380 in rent per month in the house I now live in.
So, my question is if I am to look at buying a house costing €140 to €150,000.00 have I ANY chance in getting mortgage approval??
I would rent a room (not in a relationship currently and like the feeling that there is another person for company). Does the credit rating and not showing much profit mean I will mot get one??
Anybody else gone through this or have any advice??

johnnyskeleton

First of all, if you have 10k in savings, why did you default on the debt? Id pay this back as a priority. It will still be a bad mark on your credit rating but you will at least be debt free.

Second, you will need a minimum 10% deposit so you will have to wait until that 20k arrives before you can move.

If uounare only spending 50p.w. they will ask you how you pay your bills, groceries etc.

Is the 20k a business income or a gift etc? If its business income you will have to pay tax etc.

The income for a mortgage application is your net income per year which your accountant will work out for you. It isnt simply what you draw per week (unless you have set up a limited company rather than being self employed). So if your drawings are funded by loans then your income is less, and if your business has produced enough to pay you 400 per week living expenses plus pay off a loan your income would be higher.

In any event, banks will average out your income from the last three years and that is the figure they will operate on.

It is more difficult to get a mortgage when you are self employed. Maybe I just had a bad experience but its almost as if the loan managers feel entitled to ask you about every little thing in a way that they dont of an employed person. For example, they insist on accountant certified accounts, not just tax returns. This is an additional expense. Employed persons, on the other hand simply get payslips, lettters from their employer etc.

Another thing I found was that due to the nature of not knowing when payments will be made, I can have a much lower income one year over another. Its obvious to most people that if you are paid 40k one year and 60k the following year that there is an average of 50k, most likely caused by a 10k payment arriving in January instead of December etc. But when I applied to PTSB they made a big song and dance about the earnings being lower one year.

Best of luck!

mid30slady

I thought the credit card was cleared but it was to do with interest and I never checked it was closed. It kept mounting until 2 years later I got a letter saying it had been passed ftom mbna. Cabot said it was 4k but would settle for 2k - I have paid over the 2k and they are insisting they want the 4k! I will pay it off from savings if it looks better.

The 20k is money I am able to put aside in the 6 months. I would call it a gift when asked!

It is a limited company so I am able to show I can make the payment to myself each week. I have no loans now to repay. I have the accounts done by my accountant so all is good there.

Like you, some years for me are better than others. This year has been good, I know the next 6 months will be good too - hence why I want to look for a mortgage then.

Thanks for the reply - as you say about it being more difficult when self employed - so many things are then if you were an employee.

sleepyholland

I can't advise you on how the credit card debt on your record will affect your application there are other things you can do to help your chances. Remember the bank will take a snapshot in time when assessing your application, so make this snapshot as convincing as possible.

With me, BOI wanted 2 years certified business accounts, 6 months bank account statements, 1 year credit card statements, 1 year savings account statements.

Work towards making these records 'clean'. No gambling on your bank account, no overdrafts, as much consistency as possible. Rent being paid monthly by direct debit etc.

You need to open a savings account as soon as possible. I'd strongly advise you to build those savings gradually and consistently. If you are owed 9k, it might be better that the bank saw that appear in your account 1k at a time over 9 months rather than a 9k one-off payment. This will make ti look like you can save that amount each month.

Ultimately the bank want to see that you can afford to make your mortgage payment each month for the next couple of decades. The best way to prove this is to show them that you have a good history of paying rent + saving more than what the repayments will be.

Hope that helps a little. I found BOI to be very experienced and fair at weighing up self-employed documentation. I found Ulster Bank less clued in - but they did offer me more money.

newacc2015

mid30slady wrote: »

I thought the credit card was cleared but it was to do with interest and I never checked it was closed. It kept mounting until 2 years later I got a letter saying it had been passed ftom mbna. Cabot said it was 4k but would settle for 2k - I have paid over the 2k and they are insisting they want the 4k! I will pay it off from savings if it looks better.

The 20k is money I am able to put aside in the 6 months. I would call it a gift when asked!

It is a limited company so I am able to show I can make the payment to myself each week. I have no loans now to repay. I have the accounts done by my accountant so all is good there.

Like you, some years for me are better than others. This year has been good, I know the next 6 months will be good too - hence why I want to look for a mortgage then.

Thanks for the reply - as you say about it being more difficult when self employed - so many things are then if you were an employee.

If the debt company agreed to take €2k. Why are you paying more to them now?

johnnyskeleton

mid30slady wrote: »

The 20k is money I am able to put aside in the 6 months. I would call it a gift when asked!

If youre putting money aside, then its savings from your income which is better than a gift.

It is a limited company so I am able to show I can make the payment to myself each week. I have no loans now to repay. I have the accounts done by my accountant so all is good there.

Like you, some years for me are better than others. This year has been good, I know the next 6 months will be good too - hence why I want to look for a mortgage then.

Thanks for the reply - as you say about it being more difficult when self employed - so many things are then if you were an employee.

If its a limited company then you are not actually self employed , although they will probably want to see your company info anyway.

mid30slady

I'm with Bank of Ireland since I opened an account so I'm happy to hear that.

I don't gamble and never had an overdraft and the rent is paid weekly from my account. I must change it over to monthly.

I wasn't sure about opening a savings account as I felt the fees were high enough for the two I already have.

I'm hoping that given they saw I repaid business loan - earlier than was due, that might stand to me.

Thanks again for replying - I appreciate it.

mid30slady

Re the credit card repayment, the girl I spoke to on the phone at the time told me they would settle for 2k. Now, they "have no record of that". I have no experience in dealing with them other than that.

It is a limited company - they have all the information as I only use B.O.I. and I have accounts done annually by my accountant.

Apologies for not quoting in reply - am new here!!

mid30slady

mid30slady wrote: »

I wasn't sure about opening a savings account as I felt the fees were high enough for the two I already have.

There are no fees on savings accounts.

mid30slady

Oh!!! Thanks Seth Broad Destroyer - I'm embarrassed to say I didn't know that!!
I will get onto that this week.

I will put €280 into savings per week and hope that helps. I will try increase my wage and savings in January.

riclad

Banks look at your business accounts ,from the last 3 years .
savings, can you pay loan if interests rates go up from present rate to plus 2 per cent .
say you wanna borrow 100k,
you,ll need 20k plus savings,
plus money to cover legal fees .
if you have the 10k repaid , put it in a high interest savings account,
maybe in the bank you intend to borrow from .

mid30slady

Thanks riclad.

I only started saving since September - was hoping showing 9 months savings and €40k (possibly 50) by next Summer would help me get €150k. I already show I repaid the business loan (€90k) so hope they csn consider that too. Business open a few years - never ran at a loss. With same branch since I opened the business.
I will also have around 5k that I was going to let cover legal fees and I have lots of furniture - my own bed, fridge, dishwasher, tables and chairs, crockery etc. from renting. They would keep me going for a bit until I got money together to buy what I wanted.
I will ask B.O.I. about opening a high savings account this week and lodge the e10k when I get it back in full in January.
Hopefully they will think I'm ok to loan to.

riclad

Save x amount per week, they want to see that you well organised,
a regular saver .