'It's hard to move home if you're self-employed'
My wife Caroline and I purchased our first home – a Victorian mid-terrace in Southampton, Hampshire – for £107,000 14 years ago. It was ideal for a couple with no commitments, but we now have three children, so we decided it was time to move on.
After one buyer pulled out, we eventually found a first-time buyer who bought our home for £223,500.
We have since moved into a four-bedroom 1960s bungalow on the outskirts of the city after our offer of £333,000 was accepted.
However it has not been an easy ride and at every step of the way there were obstacles, even down to the credit check.
Despite our exceptionally good credit history, we did not achieve 100%. As even though we fully pay off our credit cards at the end of every month, the timing of the check recorded outstanding balances.
Being self-employed was also an issue. We run Creativecoverage.co.uk, which represents selected professional artists and craftspeople. But for a new mortgage it was necessary to have up-to-date accounts and self-assessment tax returns. We had to collate three years’ evidence of earnings, maternity allowance, child tax credits, and child benefit – all of which takes time to prepare.
And when it came to transferring over our existing mortgage – a variable rate deal with £53,000 remaining on a rate of 1.4% above base rate – we were told by our bank over the phone that we couldn’t increase our borrowing because we did not earn enough.
Undeterred, we booked an appointment in our local branch. Our current mortgage was an old product and the bank could not transfer it to our new property. However, it did match the rate with a new loan, adding a second lifetime mortgage for £54,000 at 2.39% above base rate.
Our mortgage adviser then had to pass the loan to underwriting – a standard procedure for the self-employed – before it was finally approved a week later.
Our monthly mortgage costs stand at about £425 and there is a manageable 26-year term with an overpayment option at no additional cost.
With our £76,000 savings, the profit from our house sale, and the new mortgage, we were able to afford to buy our new home.
Saving money throughout the home-buying process has been important. We were tempted to choose an online conveyancing service to do the legal work, but contact is only by email or phone rather than in person. Instead, we went for a solicitor who quoted £1,432 for both the sale and purchase – compared to other firms, this was up to £1,500 cheaper.
We also successfully negotiated a £4,500 reduction on our home, bringing the asking price down to £328,500. This was after our homebuyer survey – carried out by a chartered surveyor (who was not VAT registered) for £360 – highlighted issues with the driveway, damp and safety hazards. And we haggled down the estate agent’s sales commission on our old home to 1% of the sale price.
After devoting a great many hours on this project, it is Caroline’s dogged persistence that has got us into our new home. We have compromised on its character, but it satisfies all our other criteria; it is detached with a large garden, it’s in a quiet location, and it’s close to good schools.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
An equity release scheme, where the money borrowed against equity in the property (up to a maximum of 50%) is subject to interest charges and although the borrower makes no payments during their lifetime, the monthly interest repayments will roll up and be added to the original debt, which will be settled on the borrower’s death. A lifetime mortgage is distinct from a home reversion scheme in that the lender never owns part of the property. But most lifetime mortgages are sold with a no negative equity guarantee. This means that if the loan is greater than the property’s value it’s a problem for the original lender and not the homeowner.
The branch of law concerned with the preparation of documents for the buying and selling of property (or remortgaging), always handled by a qualified solicitor. The conveyancing process covers many of the legal aspects of the sale/purchase/remortgage such as land registry, local authority searches, freehold and leasehold status, title deeds and much more.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.