All you need to know about a Self Employed Mortgage
If you’re looking for a mortgage, and you’re self-employed, you may have found it a little more trying then others would have. That’s because when you’re self-employed getting a mortgage is hard. Not impossible, but a h*ll of a lot more difficult than others find it. There’s more checks and procedures you’ll have to go through, and it’s just a real headache.
Luckily for you, you’re one of the lovely readers of our articles. And what makes you even more fortunate is that you’re in the right place to learn more about Self-Employed Mortgages. Welcome to MO, and our article on self-employed mortgages. We’re going to explain everything you need to know, right here, so listen up first-time buyers! Keep reading for more information.
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How do I know what counts as self-employed?
Whilst you may technically work for yourself, in the eyes of mortgage brokers and lenders, you’re only a self-employed borrower if you own 25% or more of the business. So, if you’re a silent partner with a 20% stake in the business, you’re in luck – because technically you’re not self-employed, which makes getting a mortgage a lot easier for you. Like we’ve said, getting a mortgage if you’re self-employed is difficult, but it’s not impossible. Don’t be disheartened!
Why is it more difficult?
Since the recession, it’s become increasingly more difficult for the self-employed to land themselves a mortgage. There’s so many more checks and procedures to go through, and your income has to be meticulously combed through by the mortgage provider. It’s so they can assess your ability to repay the mortgage. To guarantee that the payments will be on time and repaid to them throughout the lifetime of the mortgage. It becomes difficult to establish a stable income, especially if your business goes through seasonal periods, where you’re busier. This is where borrowers may find it difficult, whilst trying to establish a constant flow or regular income. This can affect how much you could borrow.
Most, if not all (but don’t take our word for it) mortgage providers are happy to lend you one if you’ve been a trading business for a minimum of 3 years OR have 2 years of self-assessment tax returns or accounts available to show the mortgage provider. If you can provide this, you should be able to qualify for a mortgage. Deposits and credit rating requirements vary from lender to lender, so there’s no set requirement – as every individual mortgage assessment is different. Whilst most lenders will as for the requirements above, there is a small minority that may only ask for a year (on very rare occasions), but the general consensus is 3 years of trading or 2 years of accounts.
Calculating your Mortgage
Every lender is different, but the way they calculate your mortgage may be the same. It varies for different business types. If you’re a limited company, the lender will look at salary and dividends, to see how much you could borrow for your mortgage. If you’re a sole trader or in a partnership, lenders assess your net profit as your ‘income’ to determine your mortgage amount.
Tips for Self Employed Mortgage Seekers
We’ve got some top tips for those looking for a mortgage, specifically those who are self-employed (as the article is about self-employed mortgages…). Here are our tips:
- Make sure your accounts are up to date
- Apply at the right time (how long you’ve been trading is key)
- Fill in a self-assessment tax form
- Use MO’s services to find a personalised mortgage deal for you
You’ll stand a better chance of being accepted if you have a larger deposit, a good credit score and the capability to repay your mortgage repayments too.
Using Mortgages Online means that you can input all of your personal information to find the mortgage deal that’s right for you. You’ll be able to search for self-employed mortgage deals, comparing mortgages left, right and centre with the click of a button – it’s that easy! For more information visit our Home page and start your search today. We'll even throw in a life insurance quote too, for good measure.