Screwed over by mortgage company - HELP

[cerbfan]

Some of you may have seen my other posts about the extension I have been building on my house well my current mortgage provider have now put me in a difficult position and said at the last minute that they will not be able to lend to me to complete.

Problem is that I am self employed as a Ltd company contractor and when we went through all my finances and accounts 4-5 weeks ago they said no problem and could lend me £150K plus, basically whatever I needed, however I had to get some forms from the IR to show how much I declared to the taxman for the last 3 years and that is what they officially use. However the issue is last year I took much less dividends out of the company than usual to save up for the build and minimise my tax bill this year as I knew it was going to be an expensive one. So according to these figures they will only now lend me £40K and has to go to the underwriters, the annoying thing is the mortgage broker could have pulled the same info out of my accounts and told me this 5 bloody weeks ago instead of just now!! Current mortgage provider is Lloyds TSB.

So I now need to look at alternatives, any suggestions as to who will lend based on accounts as opposed to declared income and against a half finished extension?? My plan was to get it to wind and watertight prior to borrowing and after mega delays on the windows they are now coming circa the 21st October so will be needing money basically straight after this to pay the balance for them and get the zinc on the roof before the weather turns any worse over winter!!

[vescaegg]

Pretty much everything has to go through underwriters.

I take it there wasnt a possibility of getting the money before you started?

I'd imagine a goodbroker would probably be able to sort something out.

Sarnie will be along shortly I'm sure.

[cerbfan]

No could not get it before as there was not enough equity in the house, the extension is more than doubling the size of the place and near enough doubling the value as well.

I know what you mean about going to underwriters however when the mortgage guy from Lloyds who I have used for years plugged in (the obviously wrong) figures from my accounts it came up that he could approve himself without having to go to the underwriters which would have made everything even more straight forward.

[Sarnie]

vescaegg said:

Pretty much everything has to go through underwriters.

I take it there wasnt a possibility of getting the money before you started?

I'd imagine a goodbroker would probably be able to sort something out.

Sarnie will be along shortly I'm sure.

Sounds like some sloppy work from the mortgage broker (which he can't be if he's a Lloyds employee) and he's used the wrong figures from your accounts (probably gross profit) rather than the actual figures that would be used (salary + dividends).

The main issues that you will have will be;

- The low figures for the last year will bring down the average from the last 2/3 years. Also, if the last years figures are lower than the last two years, lenders don't like declining figures as it looks like they may be lending to someone who won't be able to afford the mortgage in a year or two.

- The value of the property. If there is currently little equity in the property you will need someone to value the property on the strength of the future value rather than the current value. Most lenders will value the property based on the current value as there is the risk that you disappear with the money and they are left with a shell of a house in negative equity.

Whats the finished value expected to be and how much are you wanting to borrow?

[cerbfan]

Thanks for the reply, thing is my turnover was up a lot last year it's just that I only took mine and my wife's dividends out to the tax limit and left about 60k in the company (which I then withdrew 2 days after end of tax year) this year's turnover will be same or higher again.

Mortgage wise I have 290k outstanding, house was valued off plan last September at 660k which I think is very conservative.

Whole thing baffles me, I'm currently funding build at 12-14k per month out of earnings and have been since April but now can't borrow 150k which will only add about £1500 per month to mortgage!

[MagicalTrevor]

I'm no expert but I feel that you should check out the brokers who specialise in mortgages for self-employed/contractors rsther than high street lenders. They should be more tuned in to what is available for you and who's more likely to lend to you.

Hope it works out for you

[clarkey]

I think the problem is that you aren't considered self-employed - you are an employee, shareholder and director of a limited company. This means your salary and dividend is relevant, not the profitability of the company.

[Sarnie]

clarkey said:

I think the problem is that you aren't considered self-employed - you are an employee, shareholder and director of a limited company. This means your salary and dividend is relevant, not the profitability of the company.

This is a bit of a grey area.

Your accountant will class you as an employee.

Mortgage lenders class you as self employed (if you own more than 20% of the company).

[Sarnie]

cerbfan said:

Thanks for the reply, thing is my turnover was up a lot last year it's just that I only took mine and my wife's dividends out to the tax limit and left about 60k in the company (which I then withdrew 2 days after end of tax year) this year's turnover will be same or higher again.

Mortgage wise I have 290k outstanding, house was valued off plan last September at 660k which I think is very conservative.

Whole thing baffles me, I'm currently funding build at 12-14k per month out of earnings and have been since April but now can't borrow 150k which will only add about £1500 per month to mortgage!

Who valued it at £660k?

What is the current value?

[cerbfan]

It was a surveyor, I wanted to get a value before I started the project, current value at the stage it is at now is hard to say, in 3 weeks time extension will be complete externally apart from zinc roof. The house prior to extension starting was valued at 440k.

[cerbfan]

It was a surveyor, I wanted to get a value before I started the project, current value at the stage it is at now is hard to say, in 3 weeks time extension will be complete externally apart from zinc roof. The house prior to extension starting was valued at 440k.

[Sarnie]

cerbfan said:

It was a surveyor, I wanted to get a value before I started the project, current value at the stage it is at now is hard to say, in 3 weeks time extension will be complete externally apart from zinc roof. The house prior to extension starting was valued at 440k.

I've spoken to a few lenders today and all said they would not use a projected future value of the property, you need specialist staged finance for this sort of thing.

Can you afford to complete the extension and then remortgage the property to recoup your funds?

[cerbfan]

Cheers for trying, I realise they are unlikely to lend on future value however planned to get it valued once windows are in and expect it to value somewhere between the 440 and 660 I'm guessing at least 550 seeing it is virtually built and will just need inside finishing.

As for finishing it on current budget no I cannot and have run out of cash. Can pay for builders day to day but little left for materials.

[jayxx83]

I may be able to help. We just got a £100k advance from a lender by working out which lender would just do a drive by valuation. The house was an empty shell inside but we still got the funds. Leaving profits in company is not the end of the world as some lenders look at retained profits within ltd companies.

Always try to avoid bridging and development loans where possible as the fees and charges are punitive to say the least.

[jayxx83]

I may be able to help. We just got a £100k advance from a lender by working out which lender would just do a drive by valuation. The house was an empty shell inside but we still got the funds. Leaving profits in company is not the end of the world as some lenders look at retained profits within ltd companies.

Always try to avoid bridging and development loans where possible as the fees and charges are punitive to say the least.