Can I get a mortgage if I'm self employed?
Yes - you can get a mortgage if you're self-employed, there are just a few boxes that you need to tick first! Here's what you need to know.
You'll be classed as self-employed if you own around about 25 percent of a business, or more.
Those who are in a partnership are treated the same as those who are sole traders.
Self-employed people make up about 14 percent of the workforce, and home ownership is certainly possible if you're one of them.
Is it difficult to get a mortgage if I'm self employed?
It is undoubtedly more difficult to get a self employed mortgage than it might have been before the recession, but this is the case with mortgages generally.
Certainly, self-certification mortgages (where the borrower did not have to prove their income), are a thing of the past - they were banned by the Financial Services Authority in 2011.
As such you now need to get your income verified when you apply for a mortgage because all lenders will want to assess your ability to repay.
Most lenders are happy to give mortgages to self-employed people who have been trading for at least three years, and have two years accounts or self-assessment tax returns available.
There are always exceptions to this rule, such as the odd lender who might consider one year plus a projection, but these are in the minority.
Some particularly stringent lenders might want to see a prediction of your future clients or contracts, to make sure that you will be able to afford repayments ongoing.
There might be some discretion, for instance around deposits and credit ratings.
The best piece of advice is to shop around, and try and speak to a broker in person because they will be able to talk you through your options, help you find the best self employed mortgage deal and ensure you meet the requirements for a successful application before you apply.
How is a self-employed person's mortgage calculated?
The amount that you can borrow and the way this is calculated depends on the lender, which is why it is important to shop around for the best deal.
Some lenders set the amount you can borrow based on your previous few years' income, whereas others
calculate it based on only your previous year of trading.
The problem lenders face when deciding how much to lend to you often lies in the difficulty of establishing your regular income.
For instance you might have quiet months or years, or periods when your business does better and this might distort the amount of money that a lender would extend to you.
For sole traders and partnerships, lenders take net profits as income.
For limited companies, the lenders look at salary and dividends or in some circumstances salary and net profit of the company.
How can I maximise my chance of getting a self employed mortgage?
The length of time that you have been trading is incredibly important so time your applications according.
Making sure that you have accounts up to date, perhaps by using an accountant to make sure that this is done; and that you know your net profit before tax is also important.
You can do a self-assessment, in which case you can be given a SA302 form, in order to prove your income. Assuming you've been trading for a while it's likely that you'll already have completed a self-assessment tax return.
Can I still get the same offers as people that are employed?
Yes - there is no reason why being self-employed should limit the mortgage deals available to you and most (although not all) lenders don't discriminate on this basis.
Like employed buyers, a healthy deposit, good credit rating and ability to pay will all help you to secure a mortgage if you are self-employed.
The market is improving; more people are getting approved by mortgage lenders, and housing prices are starting to rise again. This is good news for those who are self-employed.
Although the days of self-certification mortgages are gone, and are unlikely to return, there is no reason why self-employed people cannot get mortgages.
The best option is to look across all your options, and make sure that you have the evidence you need to prove that you are able to repay the loan.
If you're a first time buyer or looking to move house or remortgage, we can help you find the best mortgage deal to suit your needs by comparing the best rates available.Source: www.money.co.uk