First time buyer - mortgage / ER First time buyer - mortgage / ER
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  1. #1

    Default First time buyer - mortgage / ER

    Hello,

    I have been contracting for about 5 years, I am now planning to buy my first house.
    I am using my personal savings to pay 20% deposit. however I am considering closing down my ltd company as I am going on Maternity leave soon. I am planning to take about 8-9 months maternity break and then look for another contract role via umbrella company for sometime or move to permanent role, depending on how situation is post my break.

    I have spoken to my accountant and he thinks that considering I am going to take a break, closing down the company and claiming ER is better option.

    I am planning on putting about 50% of the cash which I will get from LTD company to pay off my mortgage.

    I have offer accepted on one property just few days back.
    ER process takes about 2 months, and I might not have cash by the time I progress on buying this property.

    I am considering to make 10% over payment on the mortgage once the ER process is complete and I have got cash in my personal account from company bank account.

    My question is - Option 1. Is it better to wait for the ER process to complete before buying the property and use the cash against deposit (bring down LTV to about 73%, there by getting little better interest rate during first 2 year fixed period)

    or Option 2 :- continue with the buying process, once ER process is complete, use the fund to make 10% early payments.. there by reducing monthly repayments (I won't be able to reduce the term during initial fixed period )

    Can you please advise would option 1 be better or option 2?

    Thanks

  2. #2

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    Default First time buyer - mortgage / ER

    It depends how much you want that property you have offered on and how likely it is to find a similar property (and mortgage) a few months down the line.

    However with going on maternity leave and closing your company make sure you have a good conversation with a good mortgage advisor (not your accountant) about your whole circumstances.

    Edit: I wholly recommend George Yerou at Freelancer Financials
    Last edited by MrButton; 19th May 2019 at 07:16.

  3. #3

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    Option 3 - both option 1 and 2.

    Pursue them both and see what happens first.
    You might not be in a position to pay until after the ER is finished.
    Neither process is instantaenous, and you have some control over the timing of the house purchase anyway.
    Your mortgage adviser will tell you this though.
    See You Next Tuesday

  4. #4

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    If you use the ER cash where is your warchest for if plans change?

    If you shut your company down and go brolly you are going to lose an efficiency you were hoping to gain through ER. Strikes me as being a bit short sighted to shut the company and then pay higher tax via a brolly for the next 2 years or so.
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  5. #5

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    Quote Originally Posted by MrButton View Post
    It depends how much you want that property you have offered on and how likely it is to find a similar property (and mortgage) a few months down the line.

    However with going on maternity leave and closing your company make sure you have a good conversation with a good mortgage advisor (not your accountant) about your whole circumstances.

    Edit: I wholly recommend George Yerou at Freelancer Financials
    You sure that's not John Yerou? But I'd echo that recommendation and say speak to Freelancer Financials. I spoke to them this week about another re-mortgage and apparently Barclays have entered the market with some products for contractors and they are a good .5% better than what I have now so worth a chat to them.
    Last edited by northernladuk; 19th May 2019 at 12:22.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  6. #6

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    Quote Originally Posted by northernladuk View Post
    You sure that's not John Yerou?
    Hmm. No I dealt with George. George Yerou must be his son/relative. He sounded much younger than 54 years of age (Johns age on CH).

    Although John Yerou’s middle name is George.

    Maybe changed recently from Upton.

  7. #7

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    Quote Originally Posted by northernladuk View Post
    If you use the ER cash where is your warchest for if plans change?

    If you shut your company down and go brolly you are going to lose an efficiency you were hoping to gain through ER. Strikes me as being a bit short sighted to shut the company and then pay higher tax via a brolly for the next 2 years or so.
    I plan to use 50% of the cash for deposit and keep 50% in warchest.

    Thanks for your response. I will speak to freelance financiers and get their advise.

  8. #8

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    Quote Originally Posted by MrButton View Post
    It depends how much you want that property you have offered on and how likely it is to find a similar property (and mortgage) a few months down the line.

    However with going on maternity leave and closing your company make sure you have a good conversation with a good mortgage advisor (not your accountant) about your whole circumstances.

    Edit: I wholly recommend George Yerou at Freelancer Financials
    Thank you, appreciate your response. I will speak to Freelance financials and get their advise before making any decision.

  9. #9

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    I spoke to freelance financials and they were very helpful. I am totally considering going with them for the mortgage.

    Though they are are not able to advise on my ltd company finance / tax sides of things. Is there any recommendations on whom I can speak to evaluate my situation holistically and weigh out different options to help me determine whether I should consider ER route.

    Thanks again everyone, I really appreciate all the inputs. this is by far the most helpful forum I have seen on contractors business.. I am annoyed at myself for not using it sooner..

  10. #10

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    My personal opinion, your option 1 would make more sense to me...though interest rate will likely be staged. Ie 73% LTV will almost certainly be same rate as 75%, may well be same rate as 80% too. So I'd let that dictate how big a deposit you put in vs hold back.

    Your accountant should be able to guide re the company/personal tax side of things. A mortgage adviser will be better placed if you wanted specifics about interest rates/deposit etc.

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