Mortgages for the self-employed
Within the mortgage market, lending criteria has tightened enormously over recent years, focusing heavily on ensuring borrowers can prove affordability, both now and in the event of a rate rise. All applicants are subject to the same affordability checks and are required to provide evidence of their income for underwriting purposes, but for the self employed this can sometimes prove difficult.
While an employed applicant can confirm their income using payslips and P60s, the self-employed will often need to provide 2 to 3 years worth of full accounts or self assessment returns (SA302s) from HMRC. This can be particularly tricky however for someone who has changed to a self-employed status more recently.
One such couple approached the mortgage service for the Guild of Professional Estate Agents, looking for advice on purchasing a new property. Both were sole traders, but applicant 2 had only made the transition from employed to self-employed when the couple relocated in 2013. After carrying out a range of non-contracted work from ad-hoc clients, she began a rolling contract with a consultancy in 2014, and as a result could only provide 1 year’s worth of accounts.
Despite their limited proof of income, the couple’s mortgage adviser was able to place the applicants with a smaller, more specialised lender, who would consider a minimum of 12 months trading history.
They decided on a fixed rate deal, allowing them to secure their mortgage payment for the first 2 years, while also giving them time to build up their accounts further and have access to a wider range of lenders when their deal comes to an end.
Although there is often an assumption that securing a mortgage if you are self-employed is almost impossible, there are options available. As can be seen here, getting advice from a mortgage broker can be invaluable when it comes to finding a lender with the most suitable approach to underwriting.
Guild Mortgage Service, Provided by London & Country Mortgages
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
The FCA does not regulate most Buy to let mortgages.