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How Influencers & Young Entertainers Can Buy Their First Home.
Words Louise Gyambibi
Mortgage Case Manager Louise Gyambibi explains the common misconceptions of purchasing a house and provides tips on what the lenders typically like to see. There are two main routes for home ownership available to everyone:
You can choose to buy the house outright OR;
You can go down the more popular route of obtaining a mortgage.
For those who are not as financially endowed or do not have lump sums of cash lying sound (despite what the music videos show) the mortgage route may be best suited. Even if you are fortunate to have the liquid finances to purchase a property, if nothing else, my years of experience within the mortgage industry has shown me that even the wealthiest of people leverage off debt i.e. mortgages.
Mortgages
Before getting yourself psyched up with endless searches on RightMove (something which I too am guilty of) the first thing to consider is if you are “mortgage ready.”As a self-employed influencer/entertainer, the most popular legal structures that you should fall into are either a Sole Trader or a Limited Company Director.
If you are a registered sole trader (A person who is the only owner of their business. This means that there’s no legal separation between you as the business owner and the business itself) , the bank will want to see evidence of a minimum 2 years worth of self assessed income. The specific documents required would be your Tax Year Overviews and Tax Calculations. If your annual income is in excess of £12,500, ensure that you are declaring this via the GOV site so that your taxes can be filed. If you have an accountant who files your taxes for you, they will be able to help obtain these documents.
If you have registered as limited company director (You’re responsible for the legal and financial decisions your business makes, but your business’s assets and liabilities are separate from your own individual finances. This means that all profits and losses belong strictly to the company, meaning you must always act on behalf of the company) the lender's income assessment may differ slightly. In this instance, the bank will request to see your latest 2 years company accounts, 3 month business bank statements and may also request your Tax Year Overviews and Tax Calculations as with a sole trader.
Every lender’s criteria differ slightly in terms of how your income is assessed, some may take an average of the last two years figures or work off the lower of two. My best advice is to use an independent mortgage brokerage so that they can compare the criteria across lenders and find the most suitable mortgage for your needs.
The next main thing that the lenders will want to see is your bank statements in order to assess your account conduct for the last 1-6 months. In this they will be looking out for consistent streams of income and any large expenses noted. Even if you have separate statements for business and personal use, the lender will want to see both so do bear that in mind in the lead up to the mortgage application.
Another important thing to consider (which is applicable to all prospective homebuyers) is your credit commitments as everything held in your name will need to be factored into your monthly affordability. If you have leased items in your name i.e, cars, watches, etc. the monthly cost of this will be factored in. Literally everything counts! A general rule of thumb is that your credit score is important but not as important as your credit conduct - which is the main thing lenders will look out for.
Okay so now you’re mortgage ready? Some general things to note...
The bank will look to lend you about 4 - 4.5 times your annual income just to give you an idea of the value of the properties to look for. This is before considering your outgoings, so the figure may change slightly but you should be able to use some online mortgage calculators just to get a more accurate estimate.
The lender may also want to see your proof of your deposit which will have to be a minimum of ten percent of the property value in today's financial climate. The lender will always want to see the build up of the funds in your account over the last few months so if it was a lump sum deposit, be prepared to evidence this accordingly.
Penthouses and new build apartments seem to be the most popular options for influencers - I mean your home has to look the part too, right? So just as a side note, flats of any type are normally classified as “Leasehold”, which means that you own the property, but the land upon which the property is built is owned by someone else. This is important because there will be an associated additional ground rent and service changes that will have to be factored into your monthly affordability which normally start from a minimum of £1,000 per annum.
My last bit of advice is not to rush into home ownerships because of societal pressures. There is no shame in renting or staying with family until you are ready to make such a huge purchase. Much like cars, getting a house will not save you any money in the short term so really count the cost in advance!