If you are self-employed and looking into getting a mortgage, one of the things that you may be wondering about is what income are you able to use to get your mortgage.
First off, it depends if you’re a sole trader, company director or a partner:
Sole Trader
A lender will take the ‘profit from self-employment’ figure from your tax calculation. This is your net profit before personal tax.
Limited Company Director
There are a few ways that your income can be taken. One way is using your salary and dividends, as shown on your tax calculation. Alternatively, net profit after corporation tax plus directors remuneration/salary from your company accounts. There are a select few lenders that may take net profit before corporation tax as well, plus salary.
If you are a Director that receives income PAYE through your own business, and do not submit a tax return, then we can still help. In the eyes of HMRC, this is a completely legitimate way of paying yourself, if you receive no other income other than that from your business. However, mortgage lenders are still to catch up in this area. You may have been told that you are unable to get a mortgage, but this may not be the case and it is advisable to speak to us to look at your options.
Partnership
If you are within a partnership, then it would be ‘profit from partnerships’ from your tax calculation that a lender will use for your income.
The following types of income can also be used to boost your lending amount:
Alimony or Maintenance
You are allowed to use alimony/maintenance payments as part of the income you put towards your mortgage, although there are some stipulations. You will normally be required to provide a court or consent order to prove this income, as well as evidence of it being paid into your bank account.
Investment Income
If you receive regular payments from any investments you have, you may be able to use this as income. Every lender has a different way of looking at it, some will take the last 3 months as evidence, whereas others will take the income from your tax return. Others may just use a percentage of your overall portfolio value.
Rental Income
If you rent out property, then you can use this income as a part of your mortgage payments. In order for you to use this type of income for your mortgage, then you must prove that the income was listed on your yearly tax income returns. If the lender can determine from this that your rental income has been stable enough for the past two to three years, then it will likely be accepted as a type of income that you can use on your mortgage. They will take the #profit from land & property’ from your tax calculation.
Pension Income
Whether you are in receipt of a regular income from a pension or not, there are some mortgage options available to you. If it’s a regular amount, you will need to prove this through bank statements and pension statements. However, if you have an investment pension, SIPP or similar, some lenders will take a percentage of this as an annual income, helping you with your affordability.
Government Benefits/Credits
There are some lenders that will accept government benefits as income, such as disability allowance, tax credits and child benefit. Usually, this should be in addition to the main income. You will need to provide your most recent award letter for these payments, as well as bank statements to show you are in receipt of them.
Of course, all information here is subject to change and is not exhaustive. If your situation doesn’t fit exactly, it’s still worth speaking to an adviser to see how we may be able to help.