Self Employed Mortgage
There is a general belief that it is impossible to get a mortgage while self-employed. But, with the number of self-employed people rising steadily in recent times, there are a number of people who are self-employed and are eligible for a mortgage. This does not in any way mean that there is a special category of loans as there is nothing like a Self Employed Mortgage.
So, if there is no Self Employed Mortgage, then how can people who work for themselves get financing for their homes? Well, almost the same way as most other people with a slight difference. They have to prove their income, same as everyone else, only that it might be more complicated for someone with a self-earned income to do so. If you are working with a professional estate agent like Elliot Davis Properties, you will be guided through this process.
Basically, lenders are concerned about your ability to pay back. So if you work for yourself, they want to know how much you are earning and how steady your source of income is. When applying for a mortgage, these are some of the things a lender will take into consideration.
The number of years that you have been self-employed is important. Most lenders will want to know if you have had up to two years of consistent income. The more years you have had, the better your chances of being considered for a mortgage.
The type of loan you are applying for also plays a role in determining your eligibility. For instance, if you are applying for a specialist loan, which might have a higher rate, then the lender will want to look into your business history. If you are working for yourself in the same industry in which you were once employed, it might count with some lenders.
Your business structure is also an important aspect that lenders look into for several reasons. The way your income and account will be assessed will differ depending on whether you are a sole trader, a contractor, a partner or a limited liability company.
For sole traders for instance, whether your income has increased or decreased matters. If it has increased, the lender will take an average of the last two years. If it’s decreased however, they will usually work with the current lowest figure.
This works differently for contractors that earn a day rate. The rate will be multiplied by the number of working days in a year and they will want to see a minimum of a year’s history. If you run a limited liability company, the method of assessment is also different.
There are two methods through which a lender will assess a company. Firstly, the salary and dividends of the company can be used to determine the income. Secondly, the salary of the director as well as the profits that are retained can be used also.
Thus, calculating your income and eligibility can vary from one lender to another.
There are a few things you can do to make it easier for a lender to consider your loan application as a self-employed person.
Most lenders will only consider accounts that have been professionally prepared by an accountant that has been chartered or certified. So, before you approach any lender to apply for a mortgage, have your accounts ready.
Where possible, make your loan application to a lender that is likely to take a favourable look at your situation. There are some lenders who have special products tailored to those who work for themselves. At Elliot Davis Properties, we can put you in touch with such lenders and also give you solid advice on how to approach mainstream lenders.
There’s no denying the fact that working with an experienced agent can potentially make things easier for you. For instance, over the years Elliot Davis Properties has curated a long list of lenders who can offer different forms of mortgages, including fixed, variable and tracker mortgages. We work hard to shop for the best rates for our clients and can spot potential pit-falls which a less experienced agent might not notice.
There are certain tricks of the trade which any good agent can maximise to increase your eligibility for a loan. Some of these include the way your tax is reflected on your accounts. Whilst most accountants would seek to lower your tax bill legitimately, this could actually harm your eligibility for a mortgage. This is something that any of our agents will spot and work with you to rectify.
Getting a loan even though you are self-employed does not have to be a hassle, particularly if you work with expert estate agents like Elliot Davis Properties. We will work with you to get the best deal possible. Contact us 020 8552 0711 today to talk about your eligibility for a Self Employed Mortgage.