Q My wife and I have received an offer for our house. We haven't found anywhere to move to yet, and as there is very little around at the moment we are contemplating renting while we find our dream family home. However, our mortgage situation is a little complicated and I am nervous about selling and renting, effectively taking us off the housing ladder, in case I then find myself unable to get a mortgage later on down the line.
Here is a breakdown of our situation: I am a marketing consultant and the sole director and employee of my own limited company. I set the company up two years ago and have two years' accounts. I pay myself a combination of salary and dividends that take me up to the higher rate tax threshold (any money left is generally kept in the business). My wife is a primary school teacher just about to go back to work part time following maternity leave. She'll be on 60% of her full-time salary (roughly �22,000). We have no other debt and a generally good credit history, and with the equity from our current home plus savings we could have a sizeable deposit.
We have been in our current, first home for about five years and have been overpaying our mortgage ever since our repayments were slashed last year when we came off our fixed rate ? we thought we would take advantage of the low interest rates and whittle down the amount we owe.
The big dilemma I face is whether to accept an offer on our house, as I don't know how easy it is for self-employed people to get mortgages at the moment. Selling up, bagging the cash and renting in a market where buyers don't come around very often, and before house prices fall even further, initially seems to be a good move. It would certainly put us in a strong negotiating position when selling our current home and trying to find a house we want to buy. But am I likely to end up trapped because of being self-employed? MJ
A Once you have three years' of accounts you should be able to get a mortgage as easily, and on the same terms, as a full-time employee. So, provided you are happy to rent for a year or so your self-employed status should pose no barrier to getting a mortgage.
Coming out of the property market doesn't affect your ability to get a mortgage; your income does. Having a large deposit also works in your favour when having a mortgage application assessed because the less a lender has to stump up in terms of loan-to-value the better interest rate you will be offered. Having no part in a property chain will also be a bonus as it would make you nearly as attractive as a cash buyer when you eventually find the next home you want to buy.
Source: http://www.guardian.co.uk/money/2012/feb/08/self-employed-impact-mortgage
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