If you are self-employed, you might have been told at some point that it will be difficult to get a mortgage. This is not necessarily true, but there are certain criteria you will have to meet to be eligible for a mortgage. Here are some points to bear in mind to give yourself the best chance of securing a good deal.
Not all lenders use the same assessment methods, so it is worth seeking professional advice from a broker who has expertise in dealing with self-employed clients. For example, major high street lenders may be inflexible in their attitude to any potential customer who deviates from the ‘norm.’
However, there are plenty of alternative lenders out there, who understand that in today’s economy, many people work on a freelance or contract basis, or run a small business, rather than work a traditional 9-5 job. They may be more broad-minded in their selection process.
For example, some will make an offer based on your most recent year’s trading, rather than an average of the past two or three years. This can be helpful if you are growing a business from scratch, or took a dip in your profits during the pandemic. Some lenders also consider your net profits, rather than your salary or dividends.
If you are a contractor, some lenders are willing to offer deals based on your contract or daily rate. Some lenders will accept just one year of accounts, but bear in mind this will probably be at a higher interest rate than if you can provide three or more. If your self-employment period is relatively short, proof of future contracts may help your case.
Most lenders are likely to request a copy of your SA302 tax calculation and supporting tax overview, which you can request from the HMRC website. They will also usually require 3 months business and personal bank statements. This is to assess whether you have a sufficient and steady income source to meet the mortgage repayments.
They will also assess your outgoings, to understand what your other financial commitments are, just as they would with an employed applicant. You can improve on your chances of being offered a good deal by cutting back on any unnecessary expenses and luxuries in the six months before your application, and paying all bills and loan repayments on time.
Avoid taking out any loans during this time as well, if you can. It is also a good idea to check up on your credit rating, and correct any errors on your report. Make sure that you are on the electoral roll, as this is the main method credit reference agencies use to verify your identity.
Finally, saving up for as much deposit as you can afford to will boost your chances of securing a good deal.
f you are looking for self employed mortgage advice in the UK, please get in touch today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The actual rate available will depend upon your circumstances. Ask for a personalised illustration.
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