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Rule of thumb for maximum mortgage for a contractor + permie couple?

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    Rule of thumb for maximum mortgage for a contractor + permie couple?

    TLDR;

    Given a husband and wife who earn roughly similar amounts from their respective contracting and permie endeavours, what is a typical maximum multiplier/amount a mortgage provider might lend? Both have great credit histories, and the LTV would probably be slightly less than 50%.

    ----------

    As previously documented, I've been left some cash and a house in various inheritances. We've ~£200k in cash and a half-share in the house which we'll say is worth the same after fees.

    We found a place we'd love to buy >£600k and had an offer accepted £550k - at this time we'd had an offer accepted on mum's house but shortly afterwards this fell through. With the sale of mum's house, the long and short of it (with a few details omitted for simplicity) is we could sell our own house and buy this one at the same level of mortgage or less as we have now.
    Without the proceeds from mum's house, at our current mortgage level we'd be £100k short (£120k including Stamp Duty). None of this takes our pre-existing savings into account but I'm loath to touch these as they're in ISAs and even short-term I don't want to be too exposed in case of emergency.

    I work about half-time so don't have a massive income compared to other contractors, it's equivalent to a permie job probably-ish.

    Obviously eventually mum's house will sell but I'm nervous we might lose the one we want in the interim waiting to sell two properties - and it is a fairly unique property/location combo we might struggle to find again. So I'm wondering if I can stretch our mortgage far enough but have no idea what multipliers might be used. I'll ask our mortgage advisor but I thought people here might have some similar experiences, or some other ideas than "get a big mortgage" on how to approach this.

    One point in our favour (I assume) is that we would regardless have 50% or more of the purchase price in cash; we're potentially looking at a big mortgage relative to our income but not at 90% LTV

    Thoughts?
    Originally posted by MaryPoppins
    I'd still not breastfeed a nazi
    Originally posted by vetran
    Urine is quite nourishing

    #2
    And no going the NLadyUK route is not an option I want to pursue.
    Originally posted by MaryPoppins
    I'd still not breastfeed a nazi
    Originally posted by vetran
    Urine is quite nourishing

    Comment


      #3
      I'm going to go out on a limb and say that a contractor on a half-decent daily rate working half the year with a good credit rating and a stable annual turnover should have little trouble borrowing at least £150-200k, based on some combination of profit + remuneration rather than actual daily rate (which would normally give you a larger amount of borrowing but probably dependent on it being full time and a decent length contract).

      However you're unlikely to get a better answer on here than what your mortgage advisor can give you because they will have the best knowledge of what lenders are currently offering at the moment.

      Comment


        #4
        As a rule of thumb take your joint average income over the last 3 years and multiple that by 4. You most probably won't be able to borrow more than that and your monthly outgoings bring this amount down depending on how high they are. The LTV percentage won't won't much difference to how much you can borrow that will affect the rate you get offered.

        You will most probably need to provide proof of income by giving them your self assessment so work out your income using the 2013/2014, 2014/2015 & 2015/2016 tax years.

        Comment


          #5
          Originally posted by davetza View Post
          As a rule of thumb take your joint average income over the last 3 years and multiple that by 4. You most probably won't be able to borrow more than that and your monthly outgoings bring this amount down depending on how high they are. The LTV percentage won't won't much difference to how much you can borrow that will affect the rate you get offered.

          You will most probably need to provide proof of income by giving them your self assessment so work out your income using the 2013/2014, 2014/2015 & 2015/2016 tax years.
          Not really a rule of thumb that easily applies to contractors who may be turning over more than they are actually paying themselves. There are lenders who will calculate what they will lend based on day rate or profits + salary rather than salary + dividends.

          Comment


            #6
            I do recall that when buying or current home, our advisor ended up wanting sa302, SATR and company accounts to get the best permutation as different lenders wanted different things.

            I have made sure to get personal and company returned completed early in preparation
            Originally posted by MaryPoppins
            I'd still not breastfeed a nazi
            Originally posted by vetran
            Urine is quite nourishing

            Comment


              #7
              Hi D000hg,

              Most lenders these days have moved away from just using income multiples and they will assess your affordability based on a variety of factors. Obviously your earnings will play a significant part in this, but lenders will also calculate any credit commitments and your lifestyle into their affordability.

              Your mortgage adviser will be able to check all of this for you and will ensure your mortgage is fully affordable before submitting an application.

              With regards to documents for proving your income, lenders that are contractor friendly will work off of your contract itself and annualise your daily/hourly rate without the need for you to supply SA302's/accounts. A mortgage adviser may ask to see accounts or SA302's before making a recommendation to ensure that they review all possible lending options for you and that they recommend the product that is best suited to all of your needs.

              Comment


                #8
                Cheers Jess.

                I've never used a contractor specialist lender/adviser before as we know an adviser well locally but it might be worth considering. I'm actually just about to (hopefully) renew my contract but there's a slight issue that I have worked part time with no fixed rules on hours in the contract.

                Can anyone advise what language a contract needs, or what lenders/advisers will be looking for? For instance if they offer me full-time work for 2017 but I was half-time the last two years would providers red-flag the sudden jump in income? Or would they only look at my current contract?
                I'm not normally keen on full-time working as I don't need the hassle but for 6-12 months to a)get the extra cash b)expand my mortgage options it might be prudent?

                Or is there a little room for cleverness here e.g. contract says "up to 40 hours a week" - I'm sure my client would be happy to reword slightly as long as it's legit since we've a good relationship
                Originally posted by MaryPoppins
                I'd still not breastfeed a nazi
                Originally posted by vetran
                Urine is quite nourishing

                Comment


                  #9
                  Originally posted by d000hg View Post
                  And no going the NLadyUK route is not an option I want to pursue.
                  You reckon Sixpence a week will make a difference?
                  Always forgive your enemies; nothing annoys them so much.

                  Comment


                    #10
                    Originally posted by vetran View Post
                    You reckon Sixpence a week will make a difference?
                    It's Sixpence per person per week. She can service quite a few.
                    England's greatest sailor since Nelson lost the armada.

                    Comment

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