Case Study: Buy Out on Low Income

In an unusual case we had a client who has been self-employed for little over a year and only takes a ‘tax efficient’ amount of income and dividends from the business.

He was looking to remortgage a property that his partner had inherited with her two brothers. They needed to remortgage the property immediately, buying out the brothers’ shares. This is generally a difficult issue as most lenders need two years’ income history for self-employed applicants.

Our solution

We needed to find a lender who could assess our client’s income a little differently. Although he was taking a low level of drawings from the company, through our conversations we found that he was working on a ‘fixed term contract’ which meant he had regular guaranteed income from a single company. Having done this with the same employer for over a year and showing a great, consistent track record of this income, it would help in our search.

That said, finding a lender who can focus on contract income instead of the drawings generally comes with a few additional stipulations, such as having minimum income requirements of over £75,000 per year, or £500 per day on the contract. Sadly, we did not meet this criteria.

We found a lender who focuses only on the ‘day rate’ of the contract and multiplies this by 5 for a full working week, and multiply by a further 48 weeks of the year, with no minimum requirements or further restrictions.

The result

Rather than viewing his income as £25,000 a year as his accounts showed, the lender was willing to use over £60,000 of income a year, making the mortgage easily affordable.

Although this was an incredibly niche rule, the lender also boasted one of the most competitive deals on the market, and we received a full mortgage offer only four days later!

So despite the complexities of this case, our client was able to achieve his goal. The property was remortgaged and the brothers’ shares bought out, in a swift and efficient manner.