How to secure a mortgage when you are self-employed
GETTING a mortgage as a self-employed person can feel like a complicated process, and you may feel like you don’t know where to start.
However, like any mortgage, there’s no one size fits all approach and your application will be assessed based on how you trade.
What’s more, no two lenders are the same in how they interpret your income, which can make it even more confusing. It’s why seeking advice from a mortgage broker from the beginning is so essential.
They can take the reins, making the process much more straightforward and hassle-free, so you can focus on running your business.
Lenders will assess your income based on your trading style, net profit, dividends and expenses.
However, lender criteria can differ. For instance, if you apply for a mortgage as a limited company, you would presume lenders would look at what you normally earn through PAYE income and dividends.
Some will look at the profit your business made instead, while others will look at profit, and then factor in PAYE income.
Lenders used to ask for three years of accounts, as this would give them the most up-to-date overview of your business’s performance. However, some lenders work with newly self-employed individuals who only have one year’s worth, so don’t be put off.
You shouldn’t be surprised if the lender looks at the bigger picture (such as where your work is coming from and how sustainable it is, as opposed to relying solely on three years of accounts.
They may also factor in whether you took any grants from the selfemployed income support scheme (SEISS) or bounce back loans, and will check whether or not your tax affairs are up to date.
Some lenders may even base your eligibility on their analysis of accounts from the latest tax year. For example, a business that was previously booming may now be a lot quieter, and therefore deemed not as viable in the eyes of a lender.
If you have made big profits in the past, but your profits have declined over the last couple of years, they will probably pay more attention to the latter and be reluctant to lend you the amount you need.
As each lender’s criteria is different, not to mention your financial circumstances as a self-employed person, it is worth seeking the help of an experienced mortgage adviser.
They will be up to speed in terms of which lenders are most suited to specific needs and wellequipped to navigate the complexities associated with this particular type of mortgage application.
During your mortgage appointment, an adviser will ask for the information provided to Inland Revenue, such as your SA302 selfassessment tax calculation, and tax year overview. These are some of the documents that the lender uses to determine your eligibility. Once this information has been collated, your adviser will decide on how to approach the application process.
If you are looking to buy a property in the next nine months, get organised ahead of submitting a mortgage application so lenders have up-to-date details of your incomings and outgoings as a business and hire a mortgage broker to guide you