Buying a house when self employed

Panic Stations · 19-05-2019 6:00pm #1

Hi All,

I've recently left my full time job to start my own business and become self employed.

I'd like to be in a position as soon as possible to buy a house.

I was just wondering if anyone knows or has any idea what banks look for when applying for a mortgage as a self employed individual.

Any advice would be great.

Thanks

drunkmonkey · 19-05-2019 6:13pm

You could struggle if your not in business long and haven't accounts. Have you contracts for work or anything you could use as proof of future income etc. Have you another half, can ye go in together.

Panic Stations · 19-05-2019 6:42pm

So the business is profitable and has contracts in place to prove monthly income.

I have a partner who works as a nurse who obviously has a stable income

Mike3549 · 19-05-2019 6:46pm

Not 100% sure, but heard you need 3 years of audited accounts or something similar

drunkmonkey · 19-05-2019 6:47pm

They might want a cash flow statement for the next few years and whatever accounts you can do up. Probably want a look at your business plan.
Probably worth chatting with a broker.

jimmii · 19-05-2019 6:53pm

This came up in the business forum not so long ago too but didnt get much of a response. Not long after we started our business we went into AIB as standard they want 3 years of accounts but all they really wanted was proof of ability to pay so contracts would help. Because we had other income and assets the fact we had a new business didnt really matter all that matters is your ability to repay.

drunkmonkey · 19-05-2019 6:59pm

Interest rates are going up in the next year or so factor that into your budget for repayments. AIB will be.

19-05-2019 8:20pm

drunkmonkey wrote: »

Interest rates are going up in the next year or so factor that into your budget for repayments. AIB will be.

Source? No indication of rates being increased to mortgage holders at the moment imo.

Panic Stations · 19-05-2019 9:15pm

I have a good/steady income already and savings in the bank.

We have enough saved between us for our deposit and no outstanding loans,overdrafts and have proof we've been putting money aside every month for this.

I'd just like to try get on the property ladder as soon as possible so would like to know how long I may have to wait to apply.

jimmii · 19-05-2019 9:21pm

Panic Stations wrote: »

I have a good/steady income already and savings in the bank.

We have enough saved between us for our deposit and no outstanding loans,overdrafts and have proof we've been putting money aside every month for this.

I'd just like to try get on the property ladder as soon as possible so would like to know how long I may have to wait to apply.

Go in and ask. No harm in seeing what they say. Like any application it all depend son your personal circumstances that's what they make their decision based on.

Bythefire · 19-05-2019 9:27pm

Could you apply as an employee? If you are paying yourself a wage, I presume you have a payslip from your business?

Panic Stations · 19-05-2019 9:34pm

jimmii wrote: »

Go in and ask. No harm in seeing what they say. Like any application it all depend son your personal circumstances that's what they make their decision based on.

Going to do that this week for sure.

Panic Stations · 19-05-2019 9:35pm

Bythefire wrote: »

Could you apply as an employee? If you are paying yourself a wage, I presume you have a payslip from your business?

I don't think that's a route I'd like to go down but if all comes to all....

Bythefire · 19-05-2019 9:37pm

Panic Stations wrote: »

I don't think that's a route I'd like to go down but if all comes to all....

I'm not even sure if it's possible, it just came to mind when I read your post.

Panic Stations · 19-05-2019 10:25pm

Bythefire wrote: »

I'm not even sure if it's possible, it just came to mind when I read your post.

I'd say the banks are wise to that one

jlm29 · 19-05-2019 10:37pm

I thought my OH was asked for two years of accounts signed off by his accountant when we applied. That was AIB though, so maybe it was three as per the above posts.

drunkmonkey · 19-05-2019 10:39pm

Nothing funny about paying yourself a wage, are you a sole trader or ltd? There's different prsi classes you can get away with paying a cheaper one but won't get a full state pension. Tbh, bank don't care they want to see how much your making.
Your accountant should be well up on all this. It's one thing you shouldn't skimp on a bad one will get you in trouble.

Crusty Jocks · 19-05-2019 10:41pm

Mike3549 wrote: »

Not 100% sure, but heard you need 3 years of audited accounts or something similar

This is 100%

drunkmonkey · 19-05-2019 10:45pm

Crusty Jocks wrote: »

This is 100%

He may have to bend the knee to nursery in that case:D

jimmii · 19-05-2019 10:51pm

Crusty Jocks wrote: »

This is 100%

That's not true it completely depends on your circumstances. If they have enough in their favour they will look past it. We obviously arent going to get all the information here but not having 3 years doesn't mean its game over.

Panic Stations · 19-05-2019 11:05pm

It's a private limited company.

I was wondering would they look at the turnover of the business or would they be more looking at the salary I give to myself?

drunkmonkey · 19-05-2019 11:08pm

Profit, turnover is vanity.

jlm29 · 20-05-2019 7:35am

Panic Stations wrote: »

It's a private limited company.

I was wondering would they look at the turnover of the business or would they be more looking at the salary I give to myself?

They’ll look at both. They’ll take your salary into account for affordability, same as they would for an employee, but they’ll also make sure that the company can keep paying you the salary

Mrs OBumble · 20-05-2019 7:54am

drunkmonkey wrote: »

.... are you a sole trader or ltd? There's different prsi classes you can get away with paying a cheaper one but won't get a full state pension.

Just for the record , this is incorrect: state pension is covered by class S.

drunkmonkey · 20-05-2019 8:02am

Mrs OBumble wrote: »

Just for the record , this is incorrect: state pension is covered by class S.

What am I on about I've forgotten but I know my accountant made me do something so I'd be entitled to something. It had something to do with the state pension. It was something to with the type class I was paying or not paying.

Panic Stations · 20-05-2019 12:46pm

jlm29 wrote: »

They’ll look at both. They’ll take your salary into account for affordability, same as they would for an employee, but they’ll also make sure that the company can keep paying you the salary

That's what I was thinking would happen.

Senature · 20-05-2019 1:41pm

I know several self-employed people who have got mortgages without 3 years of audited accounts. It might help you to talk to an independent broker as they will have a good idea of both what you will need and which banks are likely to grant a mortgage to you in your current circumstances.

Phileas Frog · 20-05-2019 2:28pm

I'm self employed - Class S Director - and didn't need any company accounts at all.

Panic Stations · 20-05-2019 5:46pm

Phileas Frog wrote: »

I'm self employed - Class S Director - and didn't need any company accounts at all.

What bank was that with?

Panic Stations · 20-05-2019 5:46pm

Senature wrote: »

I know several self-employed people who have got mortgages without 3 years of audited accounts. It might help you to talk to an independent broker as they will have a good idea of both what you will need and which banks are likely to grant a mortgage to you in your current circumstances.

Any idea on what banks allowed that?

Senature · 20-05-2019 10:06pm

Panic Stations wrote: »

Any idea on what banks allowed that?

PM sent

drunkmonkey · 20-05-2019 10:14pm

Blakely Puny Wildfire wrote: »

Source? No indication of rates being increased to mortgage holders at the moment imo.

In fairness you don't expect me to tell you who what from bank and what position they hold. Just told to expect it in the next year.

Graham · 20-05-2019 10:25pm

Yes, if you're presenting it as fact.

Does this mystery friend also know what the ECB have planned for interest rates?

drunkmonkey · 20-05-2019 10:30pm

Bond markets have it factored in from 2022 I think...ERSI has been saying the economy can handle it now. It's been mooted in the papers as well.

Graham · 20-05-2019 10:32pm

So your friend has told you what their forecasts/estimates/guesstimates are.

That's a bit different.

drunkmonkey · 20-05-2019 10:37pm

No they hold a position in an Irish bank and we were discussing interest rates and they told me factor it in for the next year, I'll take the advice.
Point is don't over stretch yourself if your only starting off.

riclad · 21-05-2019 12:03pm

I think you need 2-3 years of accounts , made by an professional accountant to prove you can afford to borrow x amount .
Also whether self employed or working for a company you will need to save up a deposit 10-20 per cent of the house purchase price .
You should talk to a mortgage broker.
It also depends on how much savings you have ,
how much income your company makes ,
basically the bank needs to know your financial status .
i,m not saying every person needs to have accounts to get a loan.
Say you want a aib loan, open an account there , put in x amount per month.
I think financial experts say take out a private pension as you get tax credits depending on how much you put into the pension per month.

Panic Stations · 21-05-2019 12:13pm

riclad wrote: »

I think you need 2-3 years of accounts , made by an professional accountant to prove you can afford to borrow x amount .
Also whether self employed or working for a company you will need to save up a deposit 10-20 per cent of the house purchase price .
You should talk to a mortgage broker.
It also depends on how much savings you have ,
how much income your company makes ,
basically the bank needs to know your financial status .
i,m not saying every person needs to have accounts to get a loan.
Say you want a aib loan, open an account there , put in x amount per month.
I think financial experts say take out a private pension as you get tax credits depending on how much you put into the pension per month.

I'm currently with AIB atm and have been saving with them for the past few years so theres that evidence there. My OH and I have the deposit saved. It's really just a matter of getting approval and seeing what our options are.

cameramonkey · 21-05-2019 12:14pm

If you have a BOI account they might do two years accounts.

Henry Ford III · 21-05-2019 1:35pm

You can get a mortgage with 2 years accounts I'm told. Shop around.

p.s. Self employed don't need an audit.

deandean · 22-05-2019 2:26pm

This was 15+ years ago, but I got a decent-sized mortgage 9 months after leaving a regular job and starting my own company.
My accountant did up a set of 'management accounts' for the 9 months I was trading.
I did a presentation to the bank about my new company, very similar to the presentation I made to new clients.
It helped that I had a couple of 'blue chip' clients.
I got the mortgage without too much fuss.

Phileas Frog · 22-05-2019 2:40pm

Henry Ford III wrote: »

p.s. Self employed don't need an audit.

That depends on the nature of the company. If it's a sole trader, no, but if it's a Ltd or DAC it's a different matter

JohnCleary · 22-05-2019 4:29pm

We went for a mortgage application for the craic a few months ago, i'm self-employed, herself employed.

Had approval in about 3 days.

Thankfully we don't need one.... we just wanted to check *could* we get one if needed.

That said, we had a 70% deposit (savings) of our mortgage application price. I was asked for 3 years of accounts / current tax cert etc.

Panic Stations · 22-05-2019 4:31pm

Thanks all! Really helpful stuff!

Always good to hear so many different stories! Give me hope. haha

myate · 22-05-2019 6:19pm

Also self employed, for 13 odd years so accounts not a problem, although the bank wanted my most recent (2018) which normally wouldn't need to be done until November, but my accountant did them up, I gave them to the bank, approval there & then in branch! They'd given us a rough figure & said come back with 2018 accounts & they'd give approval in principle in writing. They kept their word & actually increased the amount based on the accounts! We have a deposit & equity in the house we'll be selling which helps.

Panic Stations · 22-05-2019 10:50pm

myate wrote: »

Also self employed, for 13 odd years so accounts not a problem, although the bank wanted my most recent (2018) which normally wouldn't need to be done until November, but my accountant did them up, I gave them to the bank, approval there & then in branch! They'd given us a rough figure & said come back with 2018 accounts & they'd give approval in principle in writing. They kept their word & actually increased the amount based on the accounts! We have a deposit & equity in the house we'll be selling which helps.

Was this recent enough and with what bank?

myate · 23-05-2019 8:24am

Panic Stations wrote: »

Was this recent enough and with what bank?

Just last week with Ulster. (Should have said although implied, they wanted 2018 accounts, aswell as 2016 & 2017).

Buying a house when self employed

Comments