I am self-employed: what are my chances of a mortgage?

Bill Tyson

Q – I am self-employed and would like to get a mortgage before property prices go through the roof. My problem is that I had an erratic income record during the financial crisis The last couple of years were fine and my income is now good. I applied with one of the main banks last year but I was refused. Are there other lenders out there that will give a mortgage to someone in my position?

A – Mainstream banks tend to have a negative attitude to the self-employed. They often require you to produce all sorts of extra paperwork. Some even request letters from accountants to reassure them that your business is not only profitable now but will remain so into the future. Then when you produce the sun, moon and stars in terms of financial data, they may still refuse you the loan.

Be very careful about going to any “alternative” bank. It may be a sub-prime lender. These lenders target people who can’t get loans elsewhere, particularly the self-employed, and charge them a particularly high interest rate. They know this is more likely to lead to a default so they have aggressive legal tactics to recover their money. Most of them have pulled out of the Irish market after the property crash but there may still be some around.

It’s worth another shot at getting a mortgage from one of the mainstream banks. Some, such as KBC, require just two years of tax records, at least initially. Others, like AIB, wait three but if you have had a bad year, they may allow you to go further back and show four or five years’ records. Getting a mortgage out of a bank hasn’t been easy over the past few years but there seems to be some softening in the attitude to lending now that the property market has stopped dropping like a stone.

Whichever lender you go to, make sure you compare interest rates across the market. You can do this online at bonkers.ie.

Q – I will be 65 in October this year. I know that the pension age is going up but isn’t there a transition pension I may be entitled to?

A – There was a transition pension for those reaching 65 before January 1 this year. But this has been phased out. As you will reach 65 after that date, you will now have to wait until age 66 before you get a State pension.

In the meantime, you could apply for a jobseekers’ payment if you are not working. This is a bit of an anomaly as the Department of Social Protection tells me people in your position will not be pressed to attend courses or apply for jobs. So wouldn’t it be simpler to allow people like yourself to retire in peace on a pension?

Q – I heard that from last January, PRSI is levied on savings interest. Is this correct? I am 67 and my savings are an important part of my income.

A -  The 4% PRSI on interest, dividends and rental income will be extended from January. This will bring the total rate of PRSI plus Dirt to 45%, one of the highest tax rates on savings in the world. But as a pensioner you will be safe.

The change may apply to anyone over 16 and below pension age who has an extra income from rent and savings. After 66, you no longer have to pay PRSI on income, regardless of its source.

As you’re probably aware, DIRT also doesn’t apply if your total income is below €18,000 for a single person and €36,000 for a couple.

This article appeared in The Irish Mail on Sunday


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