Self-employed case study: Paul
You’ve polished your credit score, you’ve saved for a deposit, you secured a mortgage and you’ve had the pleasure of owning your first home for a few years.
As families grow or you find that you’re looking to put down roots in a forever home, it might be time to upsize and house number two is now on the cards!
This was the case for Paul and his wife Katie, who knew they were needing a roomier place to call their home. As a self-employed business owner, Paul had a few more hurdles to jump than the rest of us when it came to securing a mortgage, so knowing he needed a considerate lender he set his sights on Furness Building Society.
Understanding your story
When it comes to small self-employed business owners, it’s not unusual to see retained profits within their business. It comes with huge benefits that allow for speedier growth and financial stability. However, in the world of mortgages, a smaller salary and retained earnings can work against you because you don’t have a high income - even if you do have a business to show for it.
Paul’s wife Katie worked as a headteacher on a healthy salary that covered both her and Paul’s minimal living costs. With Katie’s salary covering costs at home, Paul only needed to take modest earnings out from his own company. But still, the combined household income didn’t leave Paul and Katie with much wriggle room and they found that most lenders simply wouldn’t consider them for a mortgage offer on the home of their dreams.
In the hope of securing a unique mortgage for their unique situation, Katie, Paul and their broker decided a Furness Building Society deal may work well for them.
"In the world of mortgages, a smaller salary and retained earnings can work against you because you don’t have a high income - even if you do have a business to show for it."
Finding unique solutions
Paul’s budding online textile business had, over the years, made both losses and profits with the last two years on record showing an increasingly good gain. With an average of the last two profitable years still not providing quite enough evidence of borrowing capacity, we had to think outside the box to prove Paul and Katie’s eligibility.
After studying the pre-tax profits from Paul’s textile business and adding back on his salary, we were able to figure out Paul’s total income. Working with Paul’s accountant we were also able to have a good look at his management accounts for the previous six months. After doing so, we were satisfied that Paul’s business was growing and we could safely base our calculations on the most recent year of trading - meaning Paul and Katie’s plans for a larger home were given the green light!