A specialist broker can come to your rescue
Because of the many different types of self-employed, limited company directors, sole traders and contractors, it is a bit of a minefield getting a mortgage as they are all treated slightly differently by different lenders.
As experts in the field of non standard borrowing, we know which lender is say, good with contractors but not so great with those with retained profits. The key is to identify the most appropriate lender and structure the right approach, which of course is best achieved working alongside an experienced, professional broker.
Contact us today to see how we can help you.
Self employed mortgage lenders
Happily there are specialist lenders who do not treat the self employed as financial outcasts and they are eager grab a share of this burgeoning market by offering a variety of attractive deals including fixed rate mortgages.
Specialist lenders operating in the marketplace understand the needs of self-employed borrowers and where appropriate, they will take factors such as spouse's income and directors' pension contributions into account. They underwrite each case on an individual basis and can lend on one year's accounts.
One year's accounts
A common issue for self-employed borrowers is income verification; many lenders want to see three years' certified accounts, despite it being the norm to only need one year's income verification from employed borrowers. However, self employed specialist lenders will treat self-employed borrowers in exactly the same way as their employed counterparts and will consider applications from self-employed borrowers with just one year's account. In some cases lenders accept either an SA302 or a Tax Calculation, both of which must be accompanied by a Tax Year Overview.
When assessing self-employed income from running a limited company, lenders fall in to two categories. Firstly, those that take only the 'net profit before tax' figure, and secondly, those that will look at directors' remuneration and dividends.
While most lenders only look at the income actually taken out of the company, there are also lenders who understand accounts enough to take into account retained profits that are left on account within the company. This can be a very useful boost to the borrowing capacity of a self-employed borrower.
Many lenders happy to lend to self-employed borrowers only sell mortgages through intermediaries. This means you'll need a mortgage broker to talk you through your options and submit an application on your behalf. This approach will help borrowers target the right lenders - this is important as a mortgage rejection on your credit file can affect your chances of being approved by other lenders.
Demise of non status
Prior to around 2007 or 2008, non status or 'self-cert' mortgages, where no proof of income was required, were widely available and a popular option for self-employed workers who were unable to prove their income via payslips.
But self-certified mortgages were in some cases abused by all kinds of workers (employed and self-employed) inflating their income to get a bigger mortgage. Consequently self-cert mortgages were banned by the then regulator the Financial Services Authority.