Mortgage for a business owner

paddylonglegs

Hi all,

I'v heard from a few business owners that banks don't like to lend mortgages to business owners.

I can see its pretty much common sense but my friend is in full time employment but wants to start his business soon. He wants to apply for a mortgage soon but I'm trying to convince him to stay in full time employment until he gets approval, fingers crossed.

In what circumstances will a bank give a business owner a mortgage? how much would they need to be turning over or have the business up and running, or basically prove that they are making money? I just want to relay this on to him to help him realise things

Thanks all

wexford12

You would need 3 years accounts to show your income and these need to be backed up by the revenue.
If he gets loan approval now and then changes to self employed his loan will be withdrawn

horgan_p

wexford12 wrote: »

You would need 3 years accounts to show your income and these need to be backed up by the revenue.
If he gets loan approval now and then changes to self employed his loan will be withdrawn

I'd question this bit - surely once you get a mortgage you can change job to whatever you like without having to check in with the bank ?

I'm not an expert , it just sounds weird to me. then again ,it is banking and this is Ireland :rolleyes:

phormium

I think what was meant was that the loan offer would be withdrawn if the person left their job to start a business before the loan was drawn down. If it is drawn down first then there is little the bank can or will do. However I would be reluctant to take out a mortgage while contemplating starting a new business, just in case!

killers1

paddylonglegs wrote: »

Hi all,

I'v heard from a few business owners that banks don't like to lend mortgages to business owners.

I can see its pretty much common sense but my friend is in full time employment but wants to start his business soon. He wants to apply for a mortgage soon but I'm trying to convince him to stay in full time employment until he gets approval, fingers crossed.

In what circumstances will a bank give a business owner a mortgage? how much would they need to be turning over or have the business up and running, or basically prove that they are making money? I just want to relay this on to him to help him realise things

Thanks all

If you're friend applies whilst he is still in full time employment he has a better chance of securing approval but it would be foolhardy to stay in permanent employment till the mortgage has issued and then give up your income to start a new business unless he was very confident that he could maintain his current income level. If he gives up work now to start his new business and then applies he will have to wait until he has 2 full years audited accounts for his business.

The banks assess self employed/business owners in the same way they look at PAYE applications. Basically the business needs to be generating a sufficient & consistently sufficient income for the owner to qualify for the loan amount required. The business owner will also need to prove that they have a repayment capacity to service stress loans repayments on the amount required. This is assessed in the same way as PAYE employees i.e. how much does he save per month, is he paying rent, previous borrowing history etc etc..

Just because someone is self employed doesn't make their chances any more different to someone who is PAYE employed. A consistent self employed income of €50k per annum is no different to the PAYE applicants €50k income... They may have more paperwork to submit and the bank will take a close look at the industry the operate in before making a decision..