Mortgage stress..

[jenbird]

We currently own a 3 bed house with a mortgage. We have tried to sell but after a year of being on the market we took it off. We plan to rent it out and use our savings for a deposit on a new house. Mortgage will be covered by rental payment (just).

We have found a house but I am so worried it is all going to go tits up and noone will lend to us. Our circumstances are as follows:
Both directors of our own ltd company with 2 years accounts
Have a 10% deposit
Both have excellent credit ratings
Have 4 young dc's
Only one small car loan
I do all our banking online and only take money from the business when we need it I.e we pay ourselves a small salary and the rest is taken in dividends. If we were to provide bank statements there is never a surplus of money. I use our overdraft but only for short periods until I transfer money across. Because our income is so variable I do find it hard to budget although we are never short.

My worry is the mortgage company will look at all these factors and say no. What do you think our chances of getting a mortgage are?

Thanks

Get yourself a good financial advisor and they will use the figures in the best way that they can. Obviously dividends aren't guaranteed, and the profit the company makes is irrelevant as you are employees of the company.

Some mortgage companies wouldnt touch me as I don't have 3 years accounts, but Santander included previous employed income as well. They also included maintenance, tax credits and child benefit as my income.

It varies so much from company to company, that the safest thing to do is leave it in the hand of an IFA and they will get you the best deal that they can

Absolutely IFA. It is much, much trickier now than even a few years ago. If you are refused make sure you know why and if you feel they have got it wrong then challenge. I am in a partnership with many years accounts, but an underwriter could find my drawings in the accounts. A phone call directly to them saying look on page 9 line 12 solved this. I think if you fall outside the norm you do have to work harder to get lent the money.

Also bear in mind that you will have to change your current mortgage to BTL if you are going to be renting it out. You will probably need 30-40% equity in the house to change it to BTL and as most BTL mortgages are interest only, the mortgage provider will probably want some idea of how you would pay off the equity at the end of the term. It can invalidate your mortgage if you rent the property out when it is residential so you need to speak to your mortgage provider for clarification.

Not an expert or adviser but we are looking to buy a second home and the general feel I get is that 25% is the bear min. for irregular income or self employed - in my case I think 40% is the the more likely outcome. Good luck