Getting a Mortgage When You’re Self-Employed

12 - 02 - 2013

How accessible are Mortgages when you're self-employed?

There are now 367,000 more self-employed people in the UK than there were in 2008, according to the Office of National Statistics. Indeed, recent figures reveal that the number of people becoming self-employed has risen by 10% since the start of the economic downturn.
So, what effect is this increase having on the accessibility of mortgages for the self-employed?
‘It isn’t impossible for a self-employed person to get a mortgage, and in fact if your business has been running for three years or more then you will have access to most rates offered by the mainstream lenders,' said David Hollingworth, Head of Communications at mortgage broker London & Country.
‘It is possible to get a mortgage and it is not necessarily more complicated depending on your circumstances,’ he said.
‘It’s all about evidencing income and to do that lenders require two years of accounts or self-assessment.’

An End to ‘Self-Certified’ Mortgages

In the past, the self-employed with less than three years’ accounts could turn to ‘self-certified’ mortgages, which allowed millions of people to take out home loans without proving their income. However, having been banned by the Financial Services Authority in 2011, these mortgages are no longer an option.
But all is not lost for today’s newly self-employed. There are specialist lenders offering mortgages to people with new businesses. 

‘Those with less history can secure a mortgage, there are lenders that will look at those with less than two years and it may still be possible to find a mortgage,’ said Hollingworth.
However, Hollingworth advises the self-employed to approach mainstream lenders in the first instance.
‘Do not go straight to specialised lenders – some like Kensington Mortgages will specifically consider one year's accounts but they would prefer more. They are trying to put themselves in that specialist niche,’ he said.

‘You could get a mortgage from someone like the Halifax if you have an A+ credit score. They may consider one year’s accounts.’
The Lender’s Decision

In determining how much you can afford to repay, lenders will look at the net profits of your business or your income stated in your SA302 form if you are self-assessed for tax. The calculation will be based on the last year of accounts or an average of the past few years.

‘If the accounts have been steadily rising then they will be able to use the last year [when calculating borrowing] but if the accounts have been up and down over the last few years then the bank will look at the average income,’ Hollingworth said.

It is also worth keeping in mind that while some lenders will look on you more favourably if your accountant is chartered or certified, others will require your accountant to have one of these qualifications.
How We Can Help

Foremans have plenty of experience of our clients applying for and getting mortgages and will be happy to provide clients with a mortgage reference. If you have any concerns about getting a mortgage while contracting, please do not hesitate to call us on 01244 625 500.







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