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Mortgages for the self-employed

If you are looking to get on the property ladder you might be put off by the commonly held belief that getting a mortgage when you’re self-employed is much harder than for those in regular employment. Being self-employed does not make mortgage lenders any less likely to approve your application. You may however have to be a little bit more organised in your approach to your application and finances

One commonly repeated myth is that there is such a thing as a ‘self-employed mortgage’. This probably stems from the abolition of ‘Self certified’ mortgages in 2014. These enabled people to borrow money to buy a home without having to prove their income. They were originally aimed at a minority of self-employed borrowers who found it difficult to prove their income. They ended up being sold much more widely with less scrupulous borrowers exaggerating their income in order to secure a bigger mortgage with minimal checks. 

Mortgage lenders are required by law to be confident that anyone they approve for a mortgage can repay it. It is up to you, the borrower, to prove that you’re likely to be to keep up with repayments. If you are self-employed, keeping your finances neat and tidy and working out profit accurately is a little bit more complicated than just providing the PAYE P60 forms and payslips that generally form part of the proof for a person in employment. Organisation is key and if you are considering buying a house soon, or not, it is a good idea to keep your accounts properly organised. As well as being good business practice generally this also pre-empts the questions that lenders might ask about your income. 

Most lenders will want to see at least two years’ accounts or tax returns. The more accounts you can show the better. In addition, it is advisable to have; an accountant, a track record of regular work, a healthy deposit and a good credit history. The structure of your business will also affect the information lenders require. A sole trader may need to provide a copy of their self-assessment form SA302, which shows the total income received and total tax due. Partnerships and limited companies will have their own requirements. 

Financial advice portal Totally Money says; “A mortgage broker is invaluable when you are self-employed. They’ll know which lenders are willing to lend to self-employed, which take retained profits into account, and, most importantly, who will offer you the best rate.” Please get in touch to discuss how your personal circumstances will reflect on a mortgage application.

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage

 

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