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Q My husband and I are both freelancers working steadily in the arts in Scotland. Last year my taxable profits were about £10,000, his about £16,000. This year we both hope to earn more.
We received cash gifts as wedding presents and, combined with savings, now have about £10,000. We hope to put this in a first-time buyer account offering 5% interest, which will contribute a further £100 a month. Depending on our work situation we may also be able to deposit larger sums and would hope to save a further £10,000-£15,000 over the next two years.
Living in Glasgow we would ideally like to start by buying a property in the region of £120,000. I have calculated that we could afford to pay about £600 a month for our mortgage, perhaps more if our income increases.
Neither of us has been in debt and we have no outstanding loans. My husband has a credit card but I have only ever used a debit card. We can show our tax statements and can have an accountant prepare our accounts.
But I am concerned about a number of things. Will we be able to get a mortgage as self-employed people? Can we get a mortgage of £100,000 given what we earn? And will our lack of borrowing negatively affect our credit rating? Any advice would be welcome. LR
A You don't need to worry about self-employment working against you when applying for a mortgage. Provided you have at least three years' tax statements showing your earnings, you shouldn't have a problem and you don't need to go to the expense of having an accountant draw up accounts.
But it is harder to say whether you will be able to get a mortgage of £100,000 as you would need to find a lender willing to lend four times your joint income of £26,000, and there are not many of those around – although they do exist. However, you may have better luck with lenders who look instead at ability to pay when assessing mortgage applications. And with these lenders a lack of other credit commitments is a bonus rather than a disadvantage.
Finally, if you can afford to pay £600 a month you will need to find a lender charging 5.25% or less (assuming a 25-year repayment mortgage). In the current market, that should be quite easy.
Virginia Wallis
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