Preparing for your mortgage: more success, less stress!
It’s one thing we are never taught about at school, and yet it’s possibly one of the biggest decisions we will make in our lives. Mortgages will affect almost all of us at least once in our lifetimes, if not more for those lucky enough!
In order to be successful in applying for a mortgage, you need to be able to prove to a broker that you are able to afford it. This can be through bank statements, payslips, or other records to represent your income/expenses. However, as a director of a company or somebody who is self-employed – there are extra steps that will need to be considered in this journey, so let’s talk through some of them.
Get your accountant involved as soon as possible
As soon as you have an idea of wanting to buy a house, move house, or if your mortgage is up for renewal, let your accountant know. Your accountant will already have a number of deadlines that they will need to meet, be that internal or external, so giving them more than enough notice allows them to make sure they can dedicate time to helping you with your applications.
More often than not, an accountant will become involved with a mortgage application after a broker. Whilst you would think your broker would be your first point of call, your accountant will be the one helping you with obtaining your records (we’ll talk about this shortly), which may not be finalised at that point in time. Getting your accountant involved from the very start, allows them (and you!) to plan for the completion of your statutory documents early – which will make your next steps much smoother and less stressful!
Keep accounting records up to date
As we’ve already briefly touched on, your accountant will be helping you with the statutory documents required to assess your affordability.
Once you’ve let them know that you are looking to get an a/renew a mortgage, they will look to plan the finalisation of your company’s annual accounts and corporation tax, as well as your personal self-assessment tax return.
In order for them to get this turned around in a timely manner ready for you to give to your mortgage broker, you’ll need to ensure that your records are up to date. Whether you do your own bookkeeping, or hire a bookkeeper to help you, keeping your records as up-to-date as possible will not only benefit you by giving you clear visibility of your finances but also help your accountant compile your records much more quicker! If you don’t use them already, accounting software such as Xero and Dext (receipt management) are excellent tools to help you keep on top of your records. Many accountants will now use cloud software such as these as we move into a more digital era, so it’s always worth keeping an eye out for practices that work with technology – as these are a great way to get real-time information!
Filing financial statements/self-assessments
Your broker will require a number of documents from your accountants. These include, but are not limited to;
- Last 2 years of filed business accounts
- Last 2 years of filed SA302s
- Last 2 years of tax year overviews
To explain some of these terms:
- Business accounts – these will only be required if you are a director of the company. If you are self-employed, you may be required to provide 2 years of income and expenditure statements.
- SA302 – This is the information on your self-assessment tax return that shows your tax calculations in those years
- Tax year overview – this information is made available on the HMRC website after a self-assessment tax return has been filed, showing an overview of tax due in that year
A keyword highlighted in these explanations is filed. A broker will not accept any information from you that has not been filed to Companies House or HMRC, as they cannot properly assess your affordability.
It is here where I reiterate the importance of keeping your accounting records up to date – the more up-to-date your records are, the quicker your accountant can prepare your financial statements/self-assessments, the quicker they can file them and then the quicker you can assess your mortgage affordability….
Budgets and Forecasts
Something that may strengthen your application, depending on the size of the property you are looking to buy, may be a budget and/or a cash flow forecast.
By providing your broker with these documents, they will be able to clearly see your expectations for the next 12 months or more, which will help them to ultimately assess whether you can afford to make repayments for the property you are buying.
Finding an accountant who can provide you with budgets and forecasts will not only benefit you for mortgage application purposes but business activity purposes too!
Broker + accountant = stress-less experience
Connections are important in any walk of life, especially when it comes to applying for a mortgage. Connecting your broker with your accountant, allows the two (or more!) to work together more efficiently and effectively to get you to your end goal.
Alternatively, ask your accountant if they can recommend a broker! An accountant with an already good relationship with a broker is an asset to you, as they are aware of the process, what the broker will want, and in what particular way, and will have prior experience working together – a perfect pairing if you ask me!
When it comes to your mortgage and assessing your affordability, it all comes back to timing. Make sure you are preparing before diving straight in with a broker. Make sure you are communicating with your accountant, and most importantly, make sure you are making this process as stress-less as possible for yourself!