Client Background
A young couple in their late twenties were eager to purchase their first home together. One applicant was a self-employed barrister, and the other employed full-time.
The couple found a property priced at £560,000. They planned to make a 10% deposit, amounting to £56,000, and required a mortgage to cover the remaining amount.
Challenges
While employed income verification is typically straightforward, self-employed barristers often face unique challenges when dealing with lenders. This complexity arises from the nature of their income declaration as sole traders. Unlike traditional employees, barristers’ income is presented in a binary manner, which doesn’t always capture the full scope of their earnings and expenses.
Additionally, some barristers produce sole trader accounts that include Work in Progress (WIP). This practice can inflate their income figures without corresponding tax liabilities, making it harder for lenders to distinguish between actual earned income and projected earnings.
Moreover, the initial years of trading for barristers often see exponential income growth as they build their practice. While this rapid increase can be promising, it raises questions about the sustainability of such income levels, leading to further scrutiny from lenders.
Due to these factors, lenders must adopt a more detailed and tailored approach when assessing the financial situations of self-employed professionals like barristers. Understanding the nuances of their income presentation can help create a clearer financial picture for both parties.
Solution
Luther has extensive experience working with barristers and self-employed clients in general. This expertise ensures a smooth application process, as it’s crucial for the underwriter to feel confident in approving new lending. When we received a query about the increase in income, we promptly addressed it the same day, ensuring swift loan approval.
Additionally, we recommended that the client consider opening a premier account with the select bank. This not only provided a better rate but also offered valuable benefits associated with the account.
Outcome
Through thorough preparation and leveraging their eligibility for a Premier account, the couple successfully secured a mortgage. Despite the initial challenges in proving self-employed income, their combined efforts and strategic planning resulted in a favourable outcome. They are now the proud owners of their first home and are excited to embark on this new chapter in their lives.