Mortgage loan for sole traders

Resolving the most advantageous mortgage for those who have an income from employment is usually trouble-free. However, the situation with business income applicants is much more complex .

The standard assessment of entrepreneurs’ income by banks is that their income is the tax base after deducting the tax return for the last tax period divided by 12 months .

Possibilities of obtaining a mortgage for self-employed in other ways

Possibilities of obtaining a mortgage for self-employed in other ways

Some entrepreneurs – natural persons – optimize their incomes and tax returns because they want to pay as low taxes and levies as possible. Lender therefore allows entrepreneurs to obtain a mortgage through other income assessment methods . These methods, however, narrow down the number of applicants who can actually get a mortgage.

Mortgage approval based on turnover

Mortgage approval based on turnover

Almost all lender, in addition to the standard income assessment by accepting the tax base after deducting the tax liability, can also accept certain% of the turnover , which is also stated in the trader’s tax return. In most cases, this amounts to 10 to 30% of the annual turnover divided by the number of months in a year, or 12, which is calculated as the monthly net income of the sole trader. In the case of a small company, which also has lower turnover, in many cases the self-employed will not receive sufficient income to repay the mortgage to buy an apartment or build a house. Mortgages for traders with higher turnover have quite decent options.

Selected groups of sole traders

Selected groups of sole traders

Among the self-employed, the best are those who have stable and guaranteed income . Most of these are IT services, artists or athletes who work on the basis of contracts that guarantee their income. Eventually, entrepreneurs pursuing professions which are a prerequisite for membership of the chambers , e.g. doctors, lawyers, designers, etc. Lender is able to accept their turnover tax returns up to 60% under certain conditions.

A real client case – a mortgage for an entrepreneur performing IT services

A real client case - a mortgage for an entrepreneur performing IT services

We successfully helped a client doing business with IT in the mortgage business. This client, a young married man, wanted to buy a housewarming house worth 180,000 dollars. Since he was not employed and his wife was on parental leave at the time, he was worried about getting a mortgage from Lender. Since he had an optimized tax return to save on taxes and levies, it was not easy to find a suitable bank.

The client had an annual turnover of 36,000 dollars and the company with which he had concluded a contract for the performance of services, contractually guaranteed him a monthly income of 3,000 dollars. Moreover, this amount was paid regularly to his account and the client had no other loans. For a mortgage of 180,000 dollars the client needed really high income. We found him a bank that accepted 60% of his turnover, as his income was guaranteed by his customers . From his monthly calculated income of USD 1,800 and his wife ‘s income of USD 230, his mortgage “went out” and was successfully approved.

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