Self Employed Mortgages - What You Need To Know
It’s a question people ask all the time because an applicant’s job status and security impact their application. Being self-employed means that you don’t always have the same job security as someone permanently employed, so some lenders can be less welcoming.
However, the good news is, you can get a mortgage as a self-employed person. In fact, most specialist home loans for self-employed people are standard agreements. The truth is, there is no specific type of mortgage deal for the self-employed as the self-certification option was banned in 2011 by the Financial Conduct Authority (FCA).
Of the estimated 4,000 mortgages on the market, 97% of them are available to people who work for themselves. The only difference is how you prove your income in comparison to a PAYE applicant.
How Will Your Self-Employed Application Be Assessed?
A lender uses a range of information to assess your mortgage application. They are:
- Previous income
- Average revenue
- Legal status
The first two features depend on the bank and the criteria it uses. For example, some creditors go off five to six years of trading information, whereas others will use two or three. If you are a CIS subcontractor, you could be assessed on just 6 months worth of payslips. Therefore, it can be best to speak to a broker to understand the best route to getting a mortgage.
Your legal status can be broken into three categories – sole trader, partnership, and limited company. Whichever one you fall into will decide the size of your home loan. For instance, a sole trader is a one-man band and must fill out an SA302 form to highlight total income and tax paid. On the other hand, a partnership means that only your side of the business will be analysed.
How Do You Improve Your Chances Of Being Accepted By A Lender?
The first thing to note is that you’re just as likely to get a healthy mortgage offer if you’re self-employed as a person in a full-time, permanent position. All you require is the following:
- A good deposit
- A strong credit rating
- Evidence that your income will cover the repayments
Of course, not everyone can evidence the features above, which is why it can be scary applying for a self-employed mortgage. But, there’s no need to worry as you could improve the odds of being accepted by the lender. Here are the top tips that you should keep in mind.
Lean on Your Spouse
Boost Your Revenues
Hire an Accountant
Increase the Deposit
A bigger deposit eliminates doubts and lowers your monthly premiums. Of course, the required funds aren’t straightforward to find, which is why boosting your deposit can be challenging.
Remember there are bands in which interest rates are applied. By increasing your deposit, it could put you in a lower LTV band, offering you a lower, perhaps more affordable interest rate.
There are plenty of ways to improve your chances and secure a self-employed mortgage, from fixing your credit score to speaking to a broker for specialist help.