Could your accountant be inadvertently scuppering your future plans to get a mortgage on that dream house you have your eye on? Read more about the questions that accountants should be asking their clients and how you can future-proof your future plans with your business finances.
“I don’t understand why more accountants and mortgage brokers are not in bed together.” said Daniel Bailey from Middleton Finance. He wasn’t being suggestive of a romatic tryst here! He was talking about the need for accountants and mortgage advisors to work in more of a collaborative approach for clients.
I’ve been blessed that Daniel has been my own mortgage broker and helped my husband and I to move into our beautiful home last year. I pass many of my clients onto Daniel because he’s fantastic at what he does and I love to collaborate so we can get my clients exactly what it is they’re looking for when it comes to their next home.
When I meet clients for the first time, one of the questions I always ask is about personal goals. That may be to do with wanting a family or to increase the family (and therefore knowing that working on building a nest egg for maternity might be an action we get to take) or it might be to do with wanting to buy their dream property or commercial property too.
Often, accountants just focus on being the most tax-efficient. If you own a business and you’ve been privy to conversations with people asking for recommendations of accountants, the conversations usually turn to the accountant who can help you legitimately save the most money on your tax bills.
Yet life isn’t all about feeling like you got a great deal with HMRC in the latest tax year.
Life is for living and as a business owner you work too hard to then get the traumatic shock that you either can’t get a mortgage full stop or you really cannot borrow the amount you were hoping to.
Daniel Bailey from Middleton Finance talks us through some of the key points that you need to consider with your accountant when you’re self-employed and it comes to getting the best mortgage.
Is Your Accountant Stopping You Buying Your Dream Home?
“I meet clients all the time who are self-employed and I’m always disappointed to learn that their accountant, when completing a review with them, don’t ask the simple question of if they would be looking to get a mortgage or up their mortgage in the next 12 to 24 months. They just do the books and the figures and make sure they’re as tax efficient as possible.” said Daniel Bailey from Middleton Finance.
“That’s why I really enjoy collaborating with the team at Insight Finance Solutions because I know you ask those questions and work accordingly to make sure the clients are in a position where they’re able to borrow what they need for that dream home.”
“While being tax-efficient is a necessary part of business, actually focusing on the tax side of things when a client had their eye on a new property or a mortgage for the first time does not help them in the medium to long term get the mortgage they require. Particularly with limited companies who take a basic salary and then draw down dividends. I know many business owners have been conditioned by their accountants to take the money they need to live off as there’s no point taking more if they don’t need it and will just pay tax on it. Yet if a client is looking to get the best possible mortgage in the next 12 to 24 months, that is where the forward planning with their accountant is needed in order to get things moving forwards.”
Why Collaboration Between Accountants and Mortgage Brokers is Important
“Helen and the team at Insight Finance Solutions are really savvy when it comes to long-term proactive planning with a client’s business finances. She works with clients at a really early stage and then puts them in touch with me so I can help them understand their borrowing potential and what they would need to take as a wage in order to be in a better position further down the line to get the mortgage they want. A lot of accountants do not want to engage or do not even discuss any of these things with their clients which can be frustrating for myself when a client comes to me for help and they can’t get the mortgage they are after due to the financial steps they’ve been advised to take for the last couple of years.”
If You Are Currently Employed But Want to Set Up in Business
“Helen will also bring people my way who are currently employed but looking to set up in business. They may have gone to her for advice on the right business structure ahead of leaving their job and becoming self-employed. If this sounds like you, my advice would be to speak to a good accountant first and let them know what you want to do. It may not be the right time to go self-employed, especially if this is your first home or you’re significantly jumping up the property ladder.
When you are employed, you only need 3-6 months worth of payslips to prove your affordability compared 24 months when you’re self-employed to give you access to all the lenders.”
If You’re Currently a Sole Trader Looking to Incorporate
“If you are currently a sole trader completing an annual self-assessment tax return by each January, you might have been advised to become a limited company for tax reasons. If you’re looking to get a mortgage or to scale up the property ladder, it might be better to wait. If you are definitely incorporating your business but have that dream home in your mind, talk to your accountant about taking a similar amount of salary and dividends that match your profits. It’s very important for your future short and medium-term borrowing potential that you don’t take the basic salary and no dividends.”
“To summarise, accountancy is changing and I am seeing more and more accountants offering financial advisory services within their role. The badge of honour of many accountants to save as much tax as possible is outdated and could be harming clients and their future plans. A good accountant won’t just focus on business finances, they’ll help you in a whole-person approach to make your finances work for your home and business life. Many accountants are changing and it is only a positive step in the right direction.”
Daniel Bailey is from Middleton Finance in Bakewell. He has over 15 years of experience as a mortgage broker and helps clients onto the right path to take them to their dream home.