Getting a mortgage these days is difficult enough, but for the self-employed it can seem impossible to get on the property ladder.
Lenders are reluctant to offer any form of credit to individuals who work for themselves due to the financial uncertainty which typically comes with it. However, there are some companies out there who specialise in self-employed mortgages so if you’ve been, or you’re worried about being turned down, there are lenders out there who can help.
Here we’ll look at everything you need to know about self-employed mortgages before you make an application.
What options are available?
In the past, the self-employed had one main option when it came to getting a mortgage and that was the self-certified variety. However, after lenders took advantage, these mortgages were scrapped. So, what options are available to you now? Well, the good news is self-employed people these days have access to much the same mortgages as anyone else. It’s what you need in order to be accepted which differs from standard mortgages.
All lenders are different, but the average lender offering self-employed mortgages will usually want to see a minimum of two years’ accounts. This is basically to prove your income and show you’ll be able to make the repayments on the mortgage. However, don’t despair if you don’t have two years’ worth of accounts to show. Some lenders, such as Saffron Building, accept just one year’s accounts, though they will require a few other things to prove you can afford the mortgage you’re applying for.
You’ll also potentially need to prove how much you’re expecting to earn over the next year. Of course, it also helps to have a great credit rating and a good deposit.
Tips to improve your chances
While each lender is different, there are a few general tips you can follow to improve your chances of getting accepted for a self-employed mortgage.
Firstly, if you have an accountant, part of their job is to try and save you as much taxable money as possible. However, this can seriously damage your chances of getting a mortgage if it turns out you’re paying a small level of tax. It shows you don’t have a huge income and that is a red flag to mortgage lenders. You’ll also want to make sure the accountant is chartered.
Ideally, you’re also going to want to be able to show that your profits are increasing and your business is growing at a healthy rate. Your accounts will also need to be fully up to date.
Overall, while it was incredibly difficult for self-employed to get a decent mortgage years ago, these days there are numerous options available. Choosing a lender which specialises in self-employed mortgages is a good first step that will improve your chances of being accepted.