About Mortgages For Self-Employed People
Mortgage options for the self employed
If you are self-employed and are looking for a mortgage you are likely to be aware that the old self-certification mortgages were finally banned in April 2014 after misuse by both lenders and borrowers that led to a much higher risk to both parties. Self-certification mortgages were highly attractive to those who were self-employed as a loan could essentially be agreed by the borrower certifying that their income was enough to be able to afford the repayments. It is perhaps somewhat surprising that this type of mortgage was available for so long as every other mortgage applicant was expected to provide evidence of income for the previous two years in order to prove that they were a low enough risk to be given a loan.
What This Means in Real Terms
Essentially the changes mean that if you are self-employed that you will have to provide evidence of your income in order to qualify for a mortgage. This just brings applications from self-employed people in line with those who have a standard income. The additional information requirements brought in in April 2014 for standard mortgage applications also apply to those who are self-employed, although in a slightly different format due to the different nature of the job.
You are likely to see many web pages stating that it is now much harder for self-employed people to get a mortgage than it is for those on standard income streams. This isn’t strictly true. It is certainly much harder to get a mortgage than it was using the old self-certification route, but overall, while you may have to shop around a little more, you should find that it is not actually much harder to find a mortgage if you are self-employed.
How To Get a Mortgage if You Are Self-Employed
Mortgage options for self employed, contractors, and freelancer workers
No matter what your income type, you will need to know the requirements lenders set out in order to qualify for a mortgage. The standard requirement is that you have evidence of the last two years’ worth of income, although there are always exceptions to this with some requiring more and occasionally requiring less. This is where you will have to do some research, or get advice from a financial adviser, into the types of documentation that will be accepted by a lender. For those on a standard income stream it is easy as all that is required is payslips and P60s, however you will have to provide your own accounts record if you are self-employed.
If you have at least two years’ worth of accounts and proof of income then you can potentially have the choice of choosing your mortgage product from the standard range and can go through the normal mortgage application process, although be prepared for a longer than average application meeting due to having non-standard proof of income and potentially also additional questions regarding your future income. In some cases, to reduce the risk to the lender, they will ask for a larger deposit than they would from someone on a standard income stream, but this should be made clear very early in the process so you do not end up with a rejected mortgage application because of information you were not aware of.
If you don’t have the required amount of account records, or you have personal circumstances that are making it difficult to find options on the standard market, there are mortgages available specifically for those who are self-employed. In order to access these mortgages you will have to go through a specialist mortgage broker as the lenders who offer these mortgages will generally only provide a mortgage is there is an independent financial adviser in the loop.
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Get advice from a top broker
If you are in any way confused or worried about the whole process then you should get advice on how it would be best to proceed from an independent no-fees mortgage broker who has experience dealing with self employed applicant cases. They will be able to point you in the direction of lenders who are more friendly towards self-employed people, and they will also be able to advise you on the different options you have available to you for your specific circumstances. This advice could be particularly useful if you have an income that is partially from self-employment and partially through the PAYE system.
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No matter what your situation, you should make sure you do your research before getting into the details of filling in an application form. Preparing your evidence in advance will not only save time in the long run, but will also make your mortgage options clear from the beginning.