If you are self-employed, a contractor, freelancer or have any position that does not have a regular income or earnings record, then it can be more difficult to convince lenders to offer you a competitive mortgage rate due to their perceived risk. The types of challenges you might face include the following:
Proving Your Income
Depending on the lender's requirements and your individual situation, you will need to provide proof of your income, this could be through payslips P60’s, tax returns, references and/or accounts.
Your Length of Trading
If you have been self employed for a number of years, you should have a good selection of lenders to choose from when looking for a mortgage, however most will require either 2 or 3 years of accounts. It is sometime possible to find lenders who will accept one year of accounts but it is likely you will pay a much higher than average interest rate.
Complex & Varied Criteria from Lenders
When assessing someone self-employed, lenders have various different ways of assessing your income. For example, some may ask for net profit while others base their calculations on wages plus dividends or salary plus net profit. It can be hard to compare and contrast lenders and deals.
Rejection from a High Street Bank
Many self employed people feel demotivated when they are declined or offered a lot less they had hoped to borrow from their high street bank. This should not put you off, banks often apply strict, inflexible lending criteria to those who are self employed but this doesn’t mean that you won’t be able to get a mortgage elsewhere.
Top Tips to Help the Self-Employed Find a MortgageIt can be more complicated securing a mortgage when you are self-employed so make it easier for yourself by:
- Keeping accounts and finances up to date and organised, making it easy for lenders to be able to assess your financial situation.
- Speak to your accountant if you are thinking of getting a mortgage or remortgaging in the near future - they may be able to structure your accounts in a way that is advantageous for your application.
- Raise as much deposit as possible - lenders are more likely to accept your application with a larger deposit as you pose less of a risk - there are also some fantastic rates out there for those who can provide a 25% deposit or more.
Mortgage Brokers - helping the Self-Employed find a mortgageWe can help self employed people find the most suitable mortgage deals:
- Arranging mortgages for contractors based upon their contract rate.
- Helping you find a flexible mortgage provider if needed, for example a lender who will accept just one year of accounts.
- Using our specialist, in-depth knowledge of lenders and the way they make assessments to find the most suitable deal for you.
- Approaching smaller banks and specialist loan providers that will assess applications on a case by case basis.
- Saving you the time and stress of applying to numerous lenders who may be unsuitable.