Hi all
I'm picking up keys today for my house and I just thought I'd brief my fellow IT contractors on the road to success.
Scenario - I have my own limited company, my spouse is studying and taking a salary from the company, as well as my own salary. I have been contracting for over a decade. We are both First Time Buyers and at the beginning of this process, we had about €30k saved up (including €15k of child benefit being paid into one of those An Post accounts).
The good news is, this wasn't hard and my accountant was able to give me everything I needed as regards accounts, tax clearance, payslips and Revenue PAYE records.
Thanks to the use of eStatements everywhere, I did have to call the banks and get copies of personal & business statements sent out to me - at a cost.
I also had to pay extra for Management Accounts as I was applying partway through my company year (although that was only 1 bank, out of 3 that I applied to!).
Anyway, here goes and I hope this helps;
Anyway I hope this helps
I'm picking up keys today for my house and I just thought I'd brief my fellow IT contractors on the road to success.
Scenario - I have my own limited company, my spouse is studying and taking a salary from the company, as well as my own salary. I have been contracting for over a decade. We are both First Time Buyers and at the beginning of this process, we had about €30k saved up (including €15k of child benefit being paid into one of those An Post accounts).
The good news is, this wasn't hard and my accountant was able to give me everything I needed as regards accounts, tax clearance, payslips and Revenue PAYE records.
Thanks to the use of eStatements everywhere, I did have to call the banks and get copies of personal & business statements sent out to me - at a cost.
I also had to pay extra for Management Accounts as I was applying partway through my company year (although that was only 1 bank, out of 3 that I applied to!).
Anyway, here goes and I hope this helps;
- Get raises
As a contractor, I was happy with my rate until I started thinking about buying a house. Then I start taking on extra duties and at renewal time, I just demanded more money in return for these extra duties. As I was doing more work, my employers were happy to pay up.
Take advantage of contracting and demand a pay raise EVERY SINGLE TIME.
- Extract everything as PAYE salary (except accountant & pension) for at least 2 years.
The bank will average out your previous 2 years PAYE income. This gives your maximum mortgage.
If, like me, your spouse draws a salary from the company, they will just add them together to form a total PAYE salary taken from the company.
This will form the basis of calculations for your mortgage limit so you really, really, really want to maximize this over 2 or 3 years.
So if you're taking expenses, and you also want to buy a house sometime - STOP the expenses! Suck it up.
If you do the sums, as a first time buyer, I can get 3.5 times my PAYE salary. To take a minor example, my mobile phone;
Mobile Phone: €40pm = €480py. Which equates to my max potential mortgage being reduced by €1,680 (480 x 3.5). And that's only one legitimate expense out of many.
- Have a pension.
Not having a pension reduces the mortgage limit because the banks want to see that you have a pension. I asked the bank if it was worthwhile paying myself that money as PAYE and they gave it a definite "no". It was quite a big drop, so wasn't worth it and if you don't currently have a pension, start one!
- Have 3 years of:
* Accounts (signed versions)
* P60's, and/or
* Self Assessment Letters and/or
* Notice of Assessment (Form 11)
I found it best to have all them because different banks wanted different bits of paper, despite the fact that they all say the same thing.
The Form11 is especially critical because this will form the basis of the average salary used to calculate your mortgage limits. - 6 months of relatively clean personal bank statements.
OK, I had a few incidents of cash-flow which I thought would mess me up, but actually none of the banks seemed to care about us going into the red by a few 10s of euro the odd time over the 6 months. I get the impression it's far more important to them that all the bills got paid and we were still saving aggressively.
Oh, yeah, that reminds me
- Save - aggressively, for 6 months before you apply.
An important factor in affordability is how much EXTRA cash you have at the end of the month, and how they figure that out seems to be largely - how much have you saved?
So save, lots.
- 6x months of Company Bank Statements (with more ready to go if needed).
- 6x months of savings account statements
- 6x months of Payslips (if your accountant doesn't currently give these to you, they should be!)
- 2x years of contracts (yes, they asked!)
- Tax Clearance Cert
- Salary Certs
- Be prepared to request Management Accounts.
Especially if you're looking for approval part way through your company's tax year. - If you can manage your credit card, use it and pay it off every month. Repayment of short-term debt is included in your 'affordability factor' (savings & short-term debt repayments).
If you can't manage it, close it.
If you can do neither, you might consider just not mentioning it...
Anyway I hope this helps