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Original poster

SAHP causes very low Agreement in Principle?

48 replies

ClonedSquare · 13/03/2024 06:14

We've been planning to move but have come to a problem when getting an agreement in principle. The figures were being approved for are way lower than we expected.

My husband is self employed, I'm a stay at home parent/housewife. Son does attend nursery two days a week. For 21-22 and 22-23, my husband's income (salary and dividends) was £75k and £85k. This financial year, he will have earned £100k. Our only expense on the affordability side is nursery fees and we make significant savings each quarter.

Halifax approved us for £175k. The web calculators were saying we could have up to £450k, so although I knew we'd take a hit having a SAHP and a dependent child, I didn't expect it to be that much.

They're offering us less than we borrowed for our current house, which we have zero issues paying for and will be fine with the rate increase when we remortgage!

We've got a mortgage broker we intend to use so I've sent him these questions but I'm really panicking now.

Is this likely to be the case with every lender?

Is this likely to stop us remortgaging in December?

OP posts:
GinForBreakfast · 13/03/2024 06:33

Is it definitely the SAHP aspect? It's harder to get mortgages on self employed earnings. How many years' accounts does your husband have?

If it's the SAHP piece, could he add you as a director and pay you dividends?

Stressedoutforever · 13/03/2024 06:46

I guess its because you count as another dependent? Good luck and hope a broker can help

Yulona · 13/03/2024 06:49

It's more likely to be because your H is self employed. I'm a SAHP and we had no issues with an agreement in principle.

Original poster
ClonedSquare · 13/03/2024 06:52

GinForBreakfast · 13/03/2024 06:33

Is it definitely the SAHP aspect? It's harder to get mortgages on self employed earnings. How many years' accounts does your husband have?

If it's the SAHP piece, could he add you as a director and pay you dividends?

I don't know if it's definitely the SAHP aspect, but when we got our mortgage last time we were offered £430k on an agreement in principle, which was basically 4x each of our combined incomes at the time. So the self employed aspect wasn't an issue then, and he didn't even have two full years of accounts back then (our broker found a way round that).

He has five years of accounts.

He can make me a director, but that won't solve anything until way down the line when he's paid me a few dividends or it's reflected in his accounts.

OP posts:
Original poster
ClonedSquare · 13/03/2024 06:53

Yulona · 13/03/2024 06:49

It's more likely to be because your H is self employed. I'm a SAHP and we had no issues with an agreement in principle.

He was self employed when we took out our current mortgage, and we got AIPs for 4x his salary then.

OP posts:
concernedchild · 13/03/2024 06:54

You definitely need a broker. It'll be a combination of the fact you're not working, and the partner who is working is self employed.

Original poster
ClonedSquare · 13/03/2024 06:55

Stressedoutforever · 13/03/2024 06:46

I guess its because you count as another dependent? Good luck and hope a broker can help

Thank you! Yes, we figured I'd be a dependent but it just seems like a very high "penalty" to pay for that. Our household income now is barely different from when we applied for our last mortgage, so it feels very silly to be cut down so much.

OP posts:
Original poster
ClonedSquare · 13/03/2024 06:56

concernedchild · 13/03/2024 06:54

You definitely need a broker. It'll be a combination of the fact you're not working, and the partner who is working is self employed.

Thank you! Our broker last time managed to get us a mortgage without my husband having the required two full years of accounts, so hopefully he can work magic again!

OP posts:
Galliano · 13/03/2024 06:57

ClonedSquare · 13/03/2024 06:53

He was self employed when we took out our current mortgage, and we got AIPs for 4x his salary then.

Show quote history

Were you a SAHP then or did you also bring a secure income to the assessment?
It won’t stop you picking a deal with your current provider in December as they won’t reassess you.

Original poster
ClonedSquare · 13/03/2024 07:08

@GinForBreakfast I wasn't a SAHM then, but my salary was pretty low (£25k) so he was most of the income. A 4x multiplier was applied to his income then, so it seems very harsh to now only apply a 2x multiplier because we're one income.

Our joint income was £100k when we got current mortgage and now my husband's is £87k for this one. It seems very harsh to lend us 60% less (175k vs £430k) when the income has only decreased 13%.

Thank you for the reassurance about the remortgage!

OP posts:
ForDaringNavyOP · 13/03/2024 07:17

We have had the same issue. Our mortgage broker said it was because I counted as a dependent- we can borrow around 200K, when our current mortgage which we have always paid on time etc… is 400K. Our deposit is going up but it doesn’t make a difference unfortunately.

I think in general because of interest rates being higher now, it also means it’s harder to borrow more according to their affordability calculations

BranchGold · 13/03/2024 07:17

I think this is just one of those cases where you want a decent broker to find the right product for you.

Out of interest, was your salary nhs/civil service? I think these roles are considered very stable by mortgage lenders so would have been an extra layer of security for your husbands self employment.

LeroyJenkinssss · 13/03/2024 07:25

I think it might be the combination of you now not being in employment and him being self employed. Even though your income was low, your fixed salary offered some security to his income potentially fluctuating. I got a mortgage easily on my (then lower) salary with a poor credit history and DH being a SAHP. My broker is unconcerned about our current remortgage.

I didn’t know about the NHS bit though and that might be why DH didn’t negatively impact my mortgage amount.

Original poster
ClonedSquare · 13/03/2024 07:26

BranchGold · 13/03/2024 07:17

I think this is just one of those cases where you want a decent broker to find the right product for you.

Out of interest, was your salary nhs/civil service? I think these roles are considered very stable by mortgage lenders so would have been an extra layer of security for your husbands self employment.

No, it was just a regular company and I'd only been there about six months when we applied (and before that I was a supply teacher working very part time while job hunting)!

OP posts:
Jmaho · 13/03/2024 07:27

Most lenders will average your last two years income so £80k. Won't use this year's as assessment not yet submitted
I work for a lender and our affordability applies across the board. We don't lend a lower amount if you are self employed

Original poster
ClonedSquare · 13/03/2024 07:32

Jmaho · 13/03/2024 07:27

Most lenders will average your last two years income so £80k. Won't use this year's as assessment not yet submitted
I work for a lender and our affordability applies across the board. We don't lend a lower amount if you are self employed

Thank you for the insight. That means they're applying around a 2x multiplier on his salary. Does that sound about what your company would offer in his situation (ie the dependents issue)?

OP posts:
SoEmbarrassed2024 · 13/03/2024 07:35

Although his current salary is not far off your joint salary last time, having the salary amount only coming from one person instead of two means the amount of risk has increased for the lenders. It sounds like the ones you have looked at are being conservative as a result

Hopefully a broker will help find one with a different lending criteria

ForgottenCoat · 13/03/2024 07:39

You need a good mortgage broker, we had an awful one who told us to increase dividends so we could get a bigger mortgage (and a bigger tax bill) our decent mortgage broker used a company that looked at the profit of the business.

Ive also used Mojo who are an online broker and easily got me a mortgage for a second property.

Jmaho · 13/03/2024 07:39

Also likely that last time you applied rates were much lower so stress rates were also lower
Our current stress rate is over 9% so a lot of people aren't meeting affordability when they are just doing a straight remortgage
£450k is far too high though for his income with only one of you earning
I'd be thinking max £320k ish as long as a broker can find you a lender to offer that

Pinklanternspiral · 13/03/2024 07:43

I agree it’s most likely to be that your husband is self-employed. We’ve just remortgaged through L&C and were advised to take my income off the application as I’m self employed and that would make things harder so it went through on just my husbands income.

FriendlyNeighbourhoodAccountant · 13/03/2024 07:46

Your husband isn't self employed.

If he's receiving dividends he is a shareholder and (I assume a director as well) therefore an office holder/employee of the company. Unlike self employment your husband and the company are two separate legal entities.

Make sure you are telling the bank/broker he's a company director and not self employed.. it may be where some of this confusion/low AIP is coming from.

Genuine self employment can restrict your AIP but in your case find a decent broker and the fact he has his own company may be a good thing. Some lenders will accept forecasts from your accountant to show business will continue to be profitable and allow you to borrow more.

shepherdsangeldelight · 13/03/2024 07:48

ClonedSquare · 13/03/2024 07:08

@GinForBreakfast I wasn't a SAHM then, but my salary was pretty low (£25k) so he was most of the income. A 4x multiplier was applied to his income then, so it seems very harsh to now only apply a 2x multiplier because we're one income.

Our joint income was £100k when we got current mortgage and now my husband's is £87k for this one. It seems very harsh to lend us 60% less (175k vs £430k) when the income has only decreased 13%.

Thank you for the reassurance about the remortgage!

Mortgages are based on risk and strict algorithms.

Last time round you both had jobs. If your DH lost his job/became unable to work, there was at least some income coming into the house and the potential that you could earn more.
This time round if DH's income is very low due to being self employed, your salary can't instantly flex to fill the gap.

Huge difference.

Original poster
ClonedSquare · 13/03/2024 07:52

To the people saying about self-employed being seen as unstable, does it make a difference that he's a contractor with a fixed contract until the end of 2025?

@Jmaho we didn't intend to take anywhere near £450k, it's what we were being "offered" on his current income by the mortgage calculators before we did the AIP. Even now when I put in the average of his last two sets of accounts, we're being offered £360k, which is more than we need.

OP posts:
Original poster
ClonedSquare · 13/03/2024 07:54

@shepherdsangeldelight he's a contractor on a full time contract signed to the end of next year, so no fluctuation in self employed income, if that makes a difference? Obviously if he loses his contract then I can see the risk, but that would be true if he were a "permanent" employee as well.

OP posts:
Original poster
ClonedSquare · 13/03/2024 07:57

FriendlyNeighbourhoodAccountant · 13/03/2024 07:46

Your husband isn't self employed.

If he's receiving dividends he is a shareholder and (I assume a director as well) therefore an office holder/employee of the company. Unlike self employment your husband and the company are two separate legal entities.

Make sure you are telling the bank/broker he's a company director and not self employed.. it may be where some of this confusion/low AIP is coming from.

Genuine self employment can restrict your AIP but in your case find a decent broker and the fact he has his own company may be a good thing. Some lenders will accept forecasts from your accountant to show business will continue to be profitable and allow you to borrow more.

Thank you for this! The only option that seemed to fit on the AIP was self-employed, so we used that but you're right that it isn't really accurate.

His day rate was raised significantly this financial year (hence the large hike in income) and is in his contract until the end of 2025 so hopefully a broker can get a lender to accept the forecasts.

OP posts: