Accountants Reference For Mortgage
Discussion
Hi,
I'm self employed and trying to see if I can get a mortgage.
I don't need one to buy / build the house but I would like an offset arrangement to free up some dealing money, 50% of the house value would do but more would be better.
What questions are asked of an Accountant when a reference is sought ?
For my last mortgage (several years ago) all that was asked was Can Mr X afford a mortgage payment of £Y but I'm guessing things have tightened up since then.
Thanks
I'm self employed and trying to see if I can get a mortgage.
I don't need one to buy / build the house but I would like an offset arrangement to free up some dealing money, 50% of the house value would do but more would be better.
What questions are asked of an Accountant when a reference is sought ?
For my last mortgage (several years ago) all that was asked was Can Mr X afford a mortgage payment of £Y but I'm guessing things have tightened up since then.
Thanks
Not a lot to be honest.
Some lenders ask for more details than others. They will probably also ask you for an SA302 for each of the last three tax years. These are tax calculations produced by HMRC. The figures on them will be based on the figures entered on the relevant SA tax returns.
HMRC do not produce these automatically so, if you haven't already asked for them, it might be worthwhile contacting HMRC and asking for these SA302s.
Some lenders ask for more details than others. They will probably also ask you for an SA302 for each of the last three tax years. These are tax calculations produced by HMRC. The figures on them will be based on the figures entered on the relevant SA tax returns.
HMRC do not produce these automatically so, if you haven't already asked for them, it might be worthwhile contacting HMRC and asking for these SA302s.
Eric Mc said:
They will probably also ask you for an SA302 for each of the last three tax years.
That would be a problem, for the last couple of years I've gained planning (effectively made £170k) and then built a house (effectively made £210k) but as I lived in it I didn't pay income tax.Hence my wondering if an Accountants Reference - ie that I have made money and can afford a mortgage will get me around the problem.
V8RX7 said:
That would be a problem, for the last couple of years I've gained planning (effectively made £170k) and then built a house (effectively made £210k) but as I lived in it I didn't pay income tax.
Hence my wondering if an Accountants Reference - ie that I have made money and can afford a mortgage will get me around the problem.
No income tax, no mortgage.Hence my wondering if an Accountants Reference - ie that I have made money and can afford a mortgage will get me around the problem.
If you can't prove your income in a lender acceptable format (SA302's or Accountant's reference) then you won't get a mortgage.
It sounds like your last mortgage was a Self Cert mortgage, which are no longer available.
That's why I was asking exactly what they will ask the Accountant.
It's ridiculous, if I were employed I could lose my job the day after I have the mortgage or at any point during the term.
In a recession I've made a great profit out of housing, I have zero debts and can buy my house outright, yet I'm an unacceptable risk ????
It's ridiculous, if I were employed I could lose my job the day after I have the mortgage or at any point during the term.
In a recession I've made a great profit out of housing, I have zero debts and can buy my house outright, yet I'm an unacceptable risk ????
Edited by V8RX7 on Monday 14th October 17:31
V8RX7 said:
That's why I was asking exactly what they will ask the Accountant.
It's ridiculous, if I were employed I could lose my job the day after I have the mortgage or at any point during the term.
In a recession I've made a great profit out of housing, I have zero debts and can buy my house outright, yet I'm an unacceptable risk ????
The lender will ask the Accountant to verify what you have told them in your application.It's ridiculous, if I were employed I could lose my job the day after I have the mortgage or at any point during the term.
In a recession I've made a great profit out of housing, I have zero debts and can buy my house outright, yet I'm an unacceptable risk ????
Edited by V8RX7 on Monday 14th October 17:31
What would you put down as your Job Title and income?
Sarnie said:
V8RX7 said:
Builder / Developer
Earning on average in excess of £130k over the last 3 yrs
But you haven't earned anything, in the lenders view.Earning on average in excess of £130k over the last 3 yrs
If you haven't paid tax on it, it's not income that can be used for mortgage purposes.
Hence my question because my Accountant agrees with me so if the question is :
What are your clients earnings over the last 3 years - that's fine.
If the question is
What has your client paid income tax on - that isn't
Hence the thread.
V8RX7 said:
But I have earnt it as my bank balance demonstrates.
Hence my question because my Accountant agrees with me so if the question is :
What are your clients earnings over the last 3 years - that's fine.
If the question is
What has your client paid income tax on - that isn't
Hence the thread.
Your bank balance doesn't demonstrate anything as far as the lender is concerned.Hence my question because my Accountant agrees with me so if the question is :
What are your clients earnings over the last 3 years - that's fine.
If the question is
What has your client paid income tax on - that isn't
Hence the thread.
As per the mortgage application form, they will ask your Accountant for confirmation of your Turn Over, Gross Profit before tax and net profit before tax. Given that you've paid no income tax, your net profit will be zero and the lender will not lend.
Sarnie said:
Your bank balance doesn't demonstrate anything as far as the lender is concerned.
As per the mortgage application form, they will ask your Accountant for confirmation of your Turn Over, Gross Profit before tax and net profit before tax. Given that you've paid no income tax, your net profit will be zero and the lender will not lend.
I haven't seen a Mortgage form but I think you failed Accountancy.As per the mortgage application form, they will ask your Accountant for confirmation of your Turn Over, Gross Profit before tax and net profit before tax. Given that you've paid no income tax, your net profit will be zero and the lender will not lend.
My Net profit is clear, it's just my profit before and after tax are the same.
£130k - £0 = £130k
NOT O
V8RX7 said:
I haven't seen a Mortgage form but I think you failed Accountancy.
My Net profit is clear, it's just my profit before and after tax are the same.
£130k - £0 = £130k
NOT O
OP - is that actual, real, profit ( as in £130k more cash in the bank at the end of the year than there was at the beginning of the year) or is it an unrealised gain (i.e. an asset you've created over the last 12 months).?My Net profit is clear, it's just my profit before and after tax are the same.
£130k - £0 = £130k
NOT O
Banks need assurance that you can repay any loan. They get this assurance from looking at your taxable profits. I can't see here you have actually made an profit (yet)
V8RX7 said:
Ok educate me...
Basic figures
Turnover £500k
Costs £200k
Gross Profit £300k
What exactly do you think Net Profit is ?
How much of that £300k profit has been declared to HMRC? Basic figures
Turnover £500k
Costs £200k
Gross Profit £300k
What exactly do you think Net Profit is ?
From my own experience of obtaining a director's mortgage last year, the bank looks at the declared income on which they base the affordability criteria.
I'm sure that Sarnie will clarify if I'm wrong. He is the mortgage expert here after all.
Eric Mc said:
That's obviously what he was doing.
So - he is trying to get the best of both worlds.
He wants to be a profit making house developer for mortgage application purposes.
He wants to be a homeowner selling his own home for the tax man.
Which is he?
Exactly my point..........So - he is trying to get the best of both worlds.
He wants to be a profit making house developer for mortgage application purposes.
He wants to be a homeowner selling his own home for the tax man.
Which is he?
It's like selling a car you own for a £1k profit and then trying to put the £1k down as income for a mortgage application.
Of course, I'm not an Accountant, but I do know how lenders will interpret income, and this would not be viewed as a consistent sustainable income source, acceptable for mortgage purposes. I think the OP knows this hence the thread, hoping that he can circumvent lending criteria with an Accountants reference rather than the usual SA302 requirements.
I'm certainly not having a pop at the OP, but I see similar things on an almost daily basis. Self employed people who have spent years to reducing their declared income to reduce their tax liability, perfectly legitimately, only to find out that for lending purposes the declared income isn't enough for their borrowing needs.....
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