Case study - A second home purchase for a self-employed couple

We were approached by a self-employed couple looking to relocate to be closer to their daughter's school. As they'd only intend to reside in the new location for around five years, they wanted to retain their existing family home long term so they could move back into it in future. The couple ran a successful company but kept their drawings by way of small salary and dividends to a minimum.

Their maximum loan using salary and dividend income fell way short of the required amount, but the net profit of the company was much higher. They'd experienced a large increase in profits as the previous accounting year had been impacted by lockdowns.

We used a lender that would assess affordability from the net profit after tax for the most recent year in isolation, rather than the average of the last three years. The lender was happy to ignore the current residential mortgage as a letting agent confirmed that the expected rent would cover the monthly payment even though interest rates had increased substantially.