If you're self-employed, you'll probably find it much harder to arrange a mortgage than your employed counterparts even though you can comfortably afford the borrowing. High street banks tend not to cater for self-employed borrowers and their 'computer says no' underwriting procedures will often reject your application automatically.
The simplest and quickest way to find the best mortgage deal for your circumstances if you're self-employed is usually to go through a mortgage adviser. Independent mortgage advisers are fully qualified and have access to all of the deals on the market.
A good adviser will be aware of what's on offer from the small stable of specialist lenders who cater for the needs of self-employed borrowers. They will be able to assess your true financial position, advise on how much you should be looking to borrow and know where to place your case for the best outcome. In fact the specialist lenders who cater for the self-employed mortgage borrower sector tend to operate exclusively through mortgage advisers as the added layer of expertise helps mortgage applications go through more quickly and smoothly than would otherwise be the case.
In today's market, more and more self-employed people are turning to mortgage advisers to place their cases with specialist lenders. This is because the availability of mortgages for the self-employed is increasing thanks to specialist lenders and at the same time, the number of self-employed people in the UK is on the rise. In fact there are now 4.6 million self-employed people in the UK - that's 15% of the working population, the highest proportion for more than forty years. Everyone from doctors and dentists to carpenters and engineers and swelling the self employed workforce.
Of course people become self-employed for a broad range of reasons. Some are natural entrepreneurs looking to build their own success, others might have been pushed out of their existing employment during the financial crisis and ended up as their own boss. Some people find working for themselves suits them and allows them to pick and choose their hours or better combine work and family commitments. Many have figured out that the wealthiest individuals in society tend to have got to the top by running their own show rather than working to line someone else's pockets.
Working for yourself can be very demanding but very rewarding. Many people also find it liberating. There are, however, certain downsides to being self-employed and one of those downsides is the difficulty your self-employed status can cause when you apply for a mortgage.
Since 2007, mainstream high street banks have become, some might say, blinkered in their approach towards mortgage lending, cherry picking those borrowers they deem the lowest risk or simply the easiest to deal with. They tend to have automated underwriting systems, which means that if your mortgage application doesn't tick the required boxes, your case will be rejected. This has been very bad news for the self-employed contingent in the UK as it has prevented thousands of people who could comfortably afford to service a mortgage from getting the finance they want, whether that be to buy their first home, move up the property ladder, refinance their existing deal or obtain some other type of finance to carry out their property plans.
Many high street lenders ignore the self-employed altogether and those that will consider a mortgage application from a self-employed individual can be very demanding. It's standard practice for them to insist on very large deposits and three years' audited accounts before they will consider a loan request. That freezes out thousands of recently self-employed people altogether which hardly seems fair given that these lenders will accept mortgage applications from employed people who have been in their role for as little as six months in some instances.
High street lenders can also be very conservative in assessing self-employed applicants' income and the amount they are prepared to lend as a result. As any self-employed person who uses an accountant will know, an accountant will entirely legally seek to minimise your recorded income in order to minimise your tax liability. So a self-employed person's income won't necessarily reflect the true financial strength of their position and how much they can afford to borrow.
Happily, specialist lenders and the mortgage advisers who deal with them are different. They really understand the needs of self-employed mortgage borrowers and actively seek to lend to you. Some specialist lenders now only ask for a year's accounts or a tax year overview as proof of income and they understand that your financial position can be more complex than your basic income suggests. Some will take net profits into account as well as elements you can claim against tax. They will take director remuneration into account including pensions, dividends and company cars when calculating how much they will lend you and a good adviser can get a grasp of your financial position by looking at your balance sheet and will know which lenders are most likely to accept your case and lend you the mortgage you want.
So, rather than waste a time-consuming journey down the high street where you risk gathering rejections which could damage your credit record, if you're self-employed and in need of a mortgage it makes sense to visit a mortgage adviser as your first port of call. By working with specialist lenders like Precise Mortgages, advisers can give you straightforward access to self-employed mortgages.
For further details on help for the self-employed and mortgage advice please contact us today for a no obligation quote.