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Self-Employed Mortgages, The Facts.


At UK Property Finance we have worked with many self-employed clients all of which share similar concerns about their eligibility for loans, particularly where mortgages are concerned.  It can be difficult to know how your application will be viewed by a lender if you are not in “conventional” employment. It is however important to note that it is perfectly possible to qualify for a mortgage and at market leading rates, even if you are self-employed.  It is a case of knowing where to look and enlisting the right support at the earliest possible opportunity.

For more information or to discuss your requirements in more detail, book your obligation-free consultation with UK Property Finance, anytime.

Which Lenders Offer Self Employed Mortgages?

This is one of the most commonly asked questions however there is no specific answer. Lenders have their own unique policies and criteria that must be met before any applicants whether employed or self-employed, qualify for a mortgage. Certain lenders judge self-employed customers in the same way as employed whereas others look at self-employed applicants in a completely different way. It very much depends on your wider financial circumstances and the extent to which you can provide proof of income.

In this scenario, it is extremely important to carefully assess your eligibility and consider your requirements before applying to any one specific lender. Not doing this could significantly reduce your likelihood of mortgage decline which in turn could harm your credit score and future applications. In most instances, you may find the chances of qualifying for a mortgage improves dramatically by directing your applications towards specialist lenders and via an independent mortgage specialist such as UK Property Finance.  As discussed, it can be more difficult qualifying for a mortgage if you are self-employed especially through a High Street bank however with the correct presentation it is by no means impossible.

Contact UK Property Finance anytime to discuss the most appropriate lenders to approach.

Help to Buy and Right to Buy for Self-Employed Applicants

While it is not impossible to obtain a Help to Buy or Right to Buy mortgage as a self-employed worker, it can nonetheless be challenging, particularly if you only have a recent trading history and recent accounts.  Help to Buy or Right to Buy are schemes that can be difficult to access for both employed and self-employed applicants however self-employed applicants with three years or more trading evidence could receive the same standard market leading rates under the Help to Buy or Right to Buy as their employed counterparts.  If you are interested in purchasing a property under the Help to Buy or Right to Buy scheme, we can help. Assess your ability and consider the strength of your application with the help and support of the experts at UK Property Finance.

What If I Have Already Been Declined?

Each time you receive a mortgage rejection, it could be recorded on your credit file. This is the same for self-employed and employed applicants. The applications declined and the timing of these declines can reduce the chances of a successful application in the future from a new mortgage lender.  For this reason, it is strategically important to target lenders that are most likely to give your case fair consideration.

Having a mortgage application declined does not necessarily mean that you will be unable to obtain a mortgage with a different lender.  Some lenders could see this rejection as a sign of high-risk borrowing while others will simply look at the reasons for the rejection on its own merits.  Lenders often use completely different lending practices which means a rejection from one lender will not prevent your successful application with another.

Similarly, being turned down for a self-employed mortgage by a major bank or lender is quite commonplace, surprisingly even if you are believed to be mainstream.  Many self-employed applicants make the mistake of applying to the well-known High Street brands without first considering eligibility restrictions.  Unless you have extensive income proof and an outstanding credit history, you may have little luck obtaining finance on the High Street.

By contrast, it may be worthwhile setting your sights beyond the High Street and using a whole of market brokerage such as UK Property Finance who can access specialist lenders who are far more likely to provide you with the decision you need i.e. targeting the more flexible, accessible and forward-thinking lenders, rather than those who assume all self-employed applicants are naturally high-risk borrowers.

Self-Employed Mortgages Without Proof of Income

Prior to the 2007/8 credit crunch, it would have been relatively quick and easy to arrange a self-employed mortgage, with next to no income verification required. Such loans were known as ‘self-cert mortgages’, wherein the applicant simply stated their income level and the lender accepted this as proof that the monthly loan repayments were affordable.  Unsurprisingly, these easy-access home loans have since been confined to history.

Lenders are now almost legally obliged to ensure that they only issue loans to individuals who can clearly evidence affordability. This means extensive proof of income is required, irrespective of whether the applicant is self-employed or employed.  Unfortunately, this means that if you are without formal income proof, you are unlikely to qualify for a self-employed mortgage, so irrespective of your earnings and business success, you still require formal income verification as proof of affordability.

If you have any questions or concerns regarding income proof, contact a member of the team at UK Property Finance, anytime.

Proof Of Income For Self-Employed Mortgages

In reality, self-employed individuals should be able to provide the formal income proof needed to prove monthly mortgage loan affordability.  Provided your business is or is likely to be trading with sufficient profitability, it should eventually generate the required proof over time.  Examples of acceptable proof of income for self-employed mortgages include the following:

  • Pay slips / p60’s (if you are employed by your own company)
  • Benefit / Pension statements
  • SA302 tax returns – Self-employed accounts
  • Financial projections

As a general rule, lenders will ask for a minimum of three years’ accounts, in order to ensure you qualify for affordability however some specialist lenders are happy to issue mortgages on the basis of proof of income from a single years trading.

Irrespective of case complexity, there are various options and provided you can prove a strong financial position showing you can genuinely afford the repayments, there is no reason why you shouldn’t qualify for a competitive mortgage.  The main driver is to target the right lenders and ensure you have the right support during processing.

What Kinds Of Income Are Considered?

Like most criteria this differs from lender to lender, however, the more dynamic lenders consider most forms of legal and reliable income.  Typical examples:

  • Gross basic income (income without deductions for tax and insurance etc.)
  • Commission
  • Overtime
  • Bonus payments
  • Additional allowances
  • Net profits (business profits after all deductions)
  • Total annual revenues (sales generated by your business)
  • Rental income
  • Investment income
  • Pensions
  • Bursaries
  • Trust income
  • State benefits
  • Dividends

It should be possible to evidence any of the above forms of income however it is just as important that your case is presented in a way considered acceptable by the lender. In order to avoid any unnecessary delays, complications or rejections, contact the team at UK Property Finance anytime for help with preparing your application.

Getting A Good Self-Employed Mortgage Deal

The path followed to ensure you obtain a good deal as a self-employed applicant is no different than that which would be taken if you were employed. The priority is to ensure you apply exclusively with lenders who say that they support and welcome self-employed clients. 

Assuming you have been in business for at least three years and can provide sufficient income verification to prove this, there is no reason why you should be unable to qualify for a mortgage with a large choice of lenders.  Things are more difficult prior to achieving 3 years of trading but by no means impossible. As a rule, the longer you have been in business and the more evidence you can provide, the more competitive your mortgage deal will be.

You will also need to calculate the size of deposit you are able to arrange. As with most mortgages, bigger deposits can mean a higher likelihood of qualification and lower overall costs of borrowing. Lenders offering a mortgage with a minimum deposit requirement of 10% will virtually always charge a higher interest than for a 20% or 25% scheme that they offer. If raising a substantial deposit is difficult, it is worthwhile noting that the longer you have been successfully self-employed, the higher the LTV you are likely to be offered by lenders.

As mentioned, policies and criteria can vary enormously from lender to lender, so it is of the utmost importance to compare as many deals as possible from lenders across the UK. At UK Property Finance, we can conduct a whole-of-market comparison on your behalf, taking into account the specifics of your case.

With our help, you could obtain a market leading deal from a quality specialist or high street lender. Book your obligation-free consultation anytime with a member of the team.

What Happens If I Am Self-Employed & Have Bad Credit?

This adds to the complexity of the deal but again it is by no means an impossible task. In fact, it is surprisingly common for self-employed individuals to have credit blips especially when first starting out. The combination of self-employment and bad credit could limit your choice of lenders but does not necessarily mean that nobody will lend to you or that you won’t qualify for a competitive mortgage.

Applicants must target lenders that welcome the self-employed and also individuals with an imperfect credit history such as:

  • No credit history
  • Low credit score
  • Late payments
  • Missed mortgage payments
  • Defaults
  • CCJs
  • IVAs
  • Debt management schemes
  • Repossessions
  • Bankruptcy
  • Payday Loans

If your application is rejected, it could inflict further damage to your credit file. For this reason, it is of paramount importance that you carefully consider your eligibility and likelihood of being accepted by a lender, prior to submitting any application.  Some lenders will automatically exclude any poor credit applicants whatever the reason however others could take a more detailed look at the specifics and consider each individual case on its own merits.

If you have any questions or concerns regarding your credit history, UK Property Finance can advise. Contact us anytime for an obligation-free consultation to discuss the best way forward.

Can I Trust Smaller Banks & Independent Lenders?

This is the classic ‘how long is a piece of string’ question. The independent financial services market in the UK is enormous, populated by thousands of small and larger brands and businesses and very well regulated by the Financial Conduct Authority (FCA). Some of the lenders not unsurprisingly have better reputations than others but they are all required to act in a similar fashion.

When looking for a competitive self-employed mortgage deal, depending on the complexity, you may have little choice but to target small and independent lenders. You should however rest assured that this doesn’t necessarily mean that you are taking a specific risk.  The best specialist lenders in the market easily perform at the same high level as their more established and well-known counterparts and provided they are fully FCA regulated and licensed, there is no reason to suggest that you will be in unsafe hands.  The dozens of small and independent lenders across the UK have demonstrated their capacity to perform as well or indeed better than any of the major banks, particularly where flexibility and affordability is concerned.

If you would like to learn more about borrowing from specialist banks and lenders, book your obligation-free initial consultation with UK Property Finance anytime.

What Types Of Mortgages Can I Apply For?

Provided you meet the necessary criteria, you can apply for virtually any mortgage in the same way as any other borrower. There are no specific limitations or restrictions regarding the types of mortgages available for self-employed people because it depends entirely on your own individual financial circumstances, your requirements, your capacity to prove income and the flexibility of the lender you choose to work with.

Finding the Best Deal with Expert Broker Support

From start to finish, every aspect of your application can be simplified with expert broker support. At UK Property Finance, we provide a complete whole-of-market comparison service for self-employed mortgage applicants. With our help, you could gain access to an extensive range of trusted independent specialists, who can match your needs with a competitive and affordable loan. Before approaching any individual lender directly, contact UK Property Finance to find out what we can do for you. Call a member of our customer support team anytime for more information.

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Last Updated: Nov 29, 2019 @ 4:06 pm
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