Sooner or later, most of us take that first step onto the property ladder. Those tentative steps might not give us a palace at first, but after all the paperwork, checks, surveys and waiting we have to go through to find our first home, finally getting the keys is worth the wait. If you’re an employee, applying for a mortgage is relatively straight-forward, but what happens if you’re self-employed?
Running your own business can be an exhilarating experience. It can also be a terrifying one. If you’re a sole trader or any company where you’re at the top of the chain, then having to do everything yourself can be daunting. At the very least, it’s a pull on your time-management skills when trying to find the perfect work/life balance. One of the many problems you need to overcome is when you’re looking for a mortgage.
Given the economic turmoil we’ve endured over the last decade, this new post-credit-crunch world has made it even more troublesome to get a mortgage if you’re self-employed. Let’s be honest, it has made it more difficult for almost everyone, but don’t be daunted. There is a way to either get on or even move up the property ladder for those of you running your own company.
Let’s start by busting a myth or two. There’s no such thing as a ‘self-employed mortgage’. You apply for the same mortgage from the same lenders (for the most part) as everyone else, albeit with a few more hoops to jump through. Also, the concept of a ‘self-certification’ mortgage aimed specifically at self-employed people, freelancers, business owners and contractors has also gone by the wayside. So what’s left?
Most banks and building societies will consider you to be self-employed if you own more than 20% of the business from which you receive your main income. You don’t just have to be a sole-trader for this to apply. If you’re a partner, director or even contractor of a limited company, they will consider you to be self-employed if you breach that 20% mark and that company pays you your main salary.
Many self-employed people incorrectly think that because of their employment status they will be ineligible for a mortgage, so they don’t bother applying. That’s not the case. There are some specialist lenders that work with the self-employed, but also most of the high-street lenders will also consider you, providing you can provide at least two tax years of validated accounts (usually three) and have been trading for 3 years or more. As part of this, you’ll usually need a tax calculation from the HMRC for the current and previous tax years; either an SA302 form or a print-out from their website showing your income.
If you’ve got all the paperwork ready to go, how do you, as a self-employed person, go about getting the best mortgage?
If you already have a mortgage and are looking to upgrade, speak to a specialist mortgage broker who will know the market and be able to help you. They will know your financial circumstance much better so may be able to offer you options others can’t. This will allow you to find out quickly if you can borrow the money you need without too much initial paperwork and they can even carry out an agreement in principle, so you know a lender will accept you.
Finally, if it’s something you’re working towards, then don’t minimise your income to pay less tax. As much as we’d all like to pay less, it will affect your ability to get the mortgage you want. Mortgages are huge commitments, for those who have to pay them back but also for the banks and building societies who lend the money. They’re rightfully careful who to give large amounts of cash to, but they should be. If you’re self-employed with strong, successful business in good-standing, then why wouldn’t they want to help you? It can be harder when you’re self-employed, but it’s far from impossible.
If you would like to find out more about how we can help you, get in touch today on 01908 803362 or pop us an email at email@example.com.