How to get a Self Employed Mortgage
A common misconception about the self employed mortgage market is that it is now very difficult for people that are self-employed to get a loan to buy a home.
It is true that one type of mortgage that was commonly used by the self employed in the past, is now no longer available. This was called the Self Certification Mortgage.
The self-certification mortgage options have since been outlawed because lenders and borrowers alike were abusing them. The loans, which enable people to borrow without having to prove their income, were originally aimed at a tiny minority of self-employed people with special circumstances, but ended up being sold much more widely.
However, the truth is that for many self-employed people, their chances of being able to borrow via normal channels are still just as good as anyone else’s.
How to improve your chances of getting accepted for a self employed mortgage
Many self-employed people face the same challenges, as incomes can be sporadic because self-employed people are often only being paid on completion of work. As a result, there are no set monthly paydays, because it depends on how long the project or contract is going to take. The length of time you have been trading is incredibly important too, so time your application accordingly.
Make sure your accounts are up to date, perhaps by using an accountant. You should also know your net profit before tax.
You can do a self-assessment, by filling out a SA302 form in order to prove your income. If you have been trading for a while, it’s likely that you will already have completed a self-assessment tax return.
Options for self-employed mortgage borrowers
In theory, self-employed borrowers have access to exactly the same range of mortgage products as everyone else. You can find out the best rates on the market by contacting our team today. The key is that you will have to be able to prove you have the income necessary to make the repayments on the loan for which you are applying.
Typically, that will require you to have at least two years’ worth of company accounts, SA302s or tax returns, to show to lenders (although a few may request three years’ worth).
If you are self employed as a Contractor you may also have to provide evidence of work you have already lined up for the future, in order to show that your current levels of income can be maintained.
However, even if you don’t have two years’ worth of records, you may still be able to get a mortgage. Self-employed workers who have a regular track record of contract work may be able to use this to their advantage. In addition, if you already have a home loan, but wish to remortgage, either to move home or simply to get a better deal, your existing lender may be more sympathetic, especially if you have a good history of making repayments on time.
Can you get the same offers as people who are employed?
Yes, there is no reason why being self-employed should limit the self employed mortgage deals available to you. Most lenders do not discriminate on this basis.
Like employed buyers, you can help your chances of getting accepted for a mortgage by having:
- A healthy deposit
- A good credit rating
- The ability to cover your mortgage repayments
Look at all your options, and make sure you have the evidence you need to prove that you are able to repay the loan.
By far the best way for self-employed people to obtain a mortgage is through a broker, as a good mortgage broker will be able to walk you through the pitfalls and put you in a better position to succeed before you make your application.
If you are self-employed and would like to discuss getting a mortgage, please feel free to get in touch and speak to our team of dedicated mortgage advisors today.