Shared ownership: how is the household income calculated for a contractor?

**TykeMerc** · 29 March 2015, 22:58

Originally posted by mickael28 View Post

Hello,

I was reading about the Shared Ownership scheme and they mentioned:

Taking into account that we pay ourselves salary & dividends and keep some of the profit in the company, does anyone has experience about how the househould income is calculated for contractors?

Thanks...

Well since a MyCo Ltd is logically and legally a separate entity from the contractor then the only "household" income is salary and dividends. Retained profits in the company are totally irrelevant.

**mickael28** · 29 March 2015, 23:05

And do you think this scheme could try and reject the dividends as part of the household income?

Asking because some colleagues mentioned that getting a standard mortgage being a contractor was not as straightforward as being a perm as some banks wanted to calculate the money you could borrow based on your salary only (ie, dividends excluded)? And these schemes seem to have a minimum requirement as well...

**SueEllen** · 30 March 2015, 05:34

If you posted this thread in accounting/legal you would get better responses.

Mortgages are calculated either by using day rate, salary and dividends, or salary,dividends and retained profit.

However for dividends to be used you need to hold something like 50% of the company's shareholdings.

**mickael28** · 30 March 2015, 15:27

I asked my accountant and they said they didn't know, then I asked a contractor mortgage broker and he was experienced in mortgage criteria for contractors but not about *Eligibility criteria* for these scheme, hence that I thought it was more of a general question to see if anyone had gone through this process already and see how their specific household income was calculated before they even allow you to apply for the scheme.

**northernladuk** · 30 March 2015, 15:35

Found a site that says..

Your gross salary is used to assess your eligibility. This means before any deductions such as tax, pension, salary sacrifices, student loans etc. If you get any bonuses, overtime or commission, 50% of it will be considered. Second jobs and other forms of income are also included. Student loans and bursaries are not an acceptable form of income and will not be considered by housing providers.

So they will take in to account your wage, and your dividends under the 'other forms of income'. I would have thought just yourself bringing in the minimum threshold amount is going to push you very close to the 60K (as this is gross). You say 'we' so guess there are two of you so I can't see for one minute how you are going to be under this criteria.

Why are contractors even considering this anyway??

**eek** · 30 March 2015, 16:13

Originally posted by northernladuk View Post

Why are contractors even considering this anyway??

Bypass saving for a deposit?

**SueEllen** · 30 March 2015, 18:24

Originally posted by eek View Post

Bypass saving for a deposit?

I've met a couple of people who had done shared ownership.

Their mortgage plus rent adds up to more than just mortgage payments.

Added on to the fact rent payments can increase yearly but you can fix a mortgage rate for a few years.

**PerfectStorm** · 30 March 2015, 20:49

I went to see a shared ownership scheme recently, he told me that the contractor dividends model doesn't work, but that I could in theory get a job in a supermarket for a month, buy a house on that 'salary', then quit and continue paying using my contractor income.

**northernladuk** · 30 March 2015, 20:54

Originally posted by PerfectStorm View Post

I went to see a shared ownership scheme recently, he told me that the contractor dividends model doesn't work, but that I could in theory get a job in a supermarket for a month, buy a house on that 'salary', then quit and continue paying using my contractor income.

I can't believe that for one minute.

Shared ownership: how is the household income calculated for a contractor?