Self Employed Contractor Mortgage Secured for Chinese National Living in London with Right to Remain in the UK

If you’re self-employed and your earnings fluctuate significantly year on year, or if your self employed income stream was affected by COVID-19, you’ll want to hear the solution below for our clients’ self employed mortgage application.

The Scenario

Our client was a Chinese national with indefinite leave to remain in the UK, working as a self-employed contractor in the aerospace industry.

He already owned a UK property with a mortgage and was looking to buy a new primary residence in London for £665k. He required an 80% loan to value a mortgage of just over half a million pounds.

As per the standard self employed mortgage application criteria, he needed to provide at least two years of accounts to prove his self employed income.

Although he did have 2 years of tax returns, his first year of business was barely profitable at about £5k of net earnings.

But his second year of trading was more fruitful and saw him earn close to £100k. This would represent his annual income figures going forward, and he’d continued these figures into the new tax year.

The problem?

Mortgage lenders will only take an average figure across two years of earnings and won’t necessarily factor in your earning trajectory or potential future income if it's higher.

Our client's most recent annual salary was slashed in half due to his low first year of trading.

This was even though, since filing his £100k year, he had already earned over £150k in the new tax year but hadn’t consolidated his earnings in a tax return yet because the year was still ongoing.

The Solution

There was no way that our client was reaching the loan size he needed with an income multiplier based on 50% of his earnings.

So, we liaised with our client's accountant and our contacts at the lender we’d selected to find a solution (we’d chosen a lender we knew would go the extra mile to facilitate bespoke income scenarios like this).

After a lot of back and forth, the lender agreed to accept two adjusted accounting periods to top up our client's income for his application.

• Firstly, the client’s accountant extended his latest accounting period to 18 months. This included the large bulk of the client's income after the end of the 2020/21 tax year and bumped up his earnings considerably.
  
  
• We then took the six months before the 2020/21 tax year, which included the clients’ £5k earnings, and recalculated this pro-rata to get a further 12 months of earnings.
  
  
• The average of the two new income figures was over double the client’s initial application figure, and our client could reach the loan size for the London home he could afford.

Please speak to us today to see how we can help your situation.