Ah yes, Self-Employed Mortgages… ‘What? I didn’t know mortgages for self-employed people are different!’ If you’ve ever said this statement, then you’re in the right place. See, it can be slightly more tricky landing yourself a mortgage if you’re self-employed. It’s not completely impossible, but is a lot more difficult than those who aren’t self-employed… We’ll explain why, in this blog.
If you’re looking to learn about self-employed mortgages, then stay on this page. We’ll tell you everything you need to know, from why it’s so difficult to what you can do about it! Here’s all you need to know about self-employed mortgages.
Self-Employed Mortgages in the eyes of Lenders
You may think if you work for yourself, you’re self-employed – not in the eyes of lenders… Yes, the criteria for being a self-employed borrower is owning 25% or more of the business. A stakeholder with 20% in the business, let’s say, is not self-employed. Luckily for them, you’re better off finding a mortgage – because it’s less complicated. But, that’s why the Zing team is here! To explain how the self-employed can land a mortgage. It’s hard, but not impossible, so don’t stress.
The Reason it’s harder…
In our post-recession Britain, it’s become harder for the self-employed to find a mortgage. It’s more difficult because there’s so many more hoops to jump through, in order to have your mortgage granted to you. They’ll hold a magnifying glass to your income, meticulously looking through your outgoings, your profits and more, to see if you can afford the mortgage. Because for lenders, they only want to know the mortgage can be repaid each month. Due to the fact most, self-employed people won’t pay themselves a strict salary, it becomes difficult for lenders to determine income, thus meaning it’s more difficult to pin point whether a mortgage can be repaid. This could impact the total amount you could borrow.
What you need
So, if you’re looking for a mortgage and are self-employed, you should be aware of what you’ll need to show to most lenders – if not all of them, but different lenders ask for different things. The general consensus is that if you’ve been trading for a minimum of 3 years, you’ll be able to land yourself a mortgage. OR if you have 2 years of self-assessment tax reports or the accounts to show a lender, you should be able to qualify for a mortgage – but like we said, every lender is different. Some may ask for more or less, but it’s dependent on the provider.
Whilst every lender’s criteria may vary, the way they calculate your mortgage usually isn’t. For limited companies, the mortgage provider will look into your salary and dividends, in order to determine your borrowing amount. For sole traders or those in a partnership, lenders will take your net profit into account, and define it as your ‘income’, then they’ll use that to see how much you can borrow.
So, if you’re looking to land a mortgage, and you’re self-employed, here’s some tips and tricks to help make your search even just a little bit easier…
- Keep your accounts up to date
- Be sure you’ve been trading for at least 3 years
- Make sure you fill out self-assessment tax forms
- Be sure you have a larger deposit (if you can)
- Check your credit score, good credit is key
- Speak to Zing…
If you’re unsure about getting a mortgage when you’re self-employed, speak to a member of the Zing team, to see what we can do for you. We aim to help all mortgage seekers and provide them with the deal that’s right for them.
Give us a call, or send us a message, to discuss self-employed mortgages.