Everything You Need to Know About Self-Employed Mortgages
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, did you know that there are some companies out there who specialise in self-employed mortgages? So, if you are worrying about being turned down, it’s important you know there are lenders out there who can help.
Here’s a look at everything you need to know about getting a great, self-employed mortgage.
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 started to really use them, these mortgages eventually were scrapped. So, what options are available to you now? 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 nice amount of cash on 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.
First, if you have an accountant, part of their job is to try and save you a bit of money in taxes. Depending on what they do, this will make it more difficult for your potential lender to see your true income. Be sure you are at the ready to point out your operations, cash flow, actual expenses and so on so the lender can understand exactly how you are going to pay them back. After all, that is really what they care about.
Ideally, you’re also going to want to be able to show that both your income and profits are increasing – and that your business is poised to grow at a healthy rate in the future. Make sure you have your tax returns, bank statements and operating reports ready to go to show the lender as he will be asking for them.
Overall, while it can be more difficult for self-employed individuals to get mortgages, these days there are numerous options available. Choosing a lender which specialises in self-employed mortgages is a good first step and being ready to support your case is the second. Doing this should improve your chances of being accepted dramatically.