Self employed mortgages
The credit crunch made it harder for freelancers, self-employed and contract workers to get access to mortgage facilities from most lenders. As a self-employed individual, it can be hard to get a mortgage as you are required to prove that your source of income is reliable. However, it is by no means impossible and more and more lenders are willing to lender to such circumstances. If you are a self-employed individual looking for a mortgage to buy a home, some lenders offer specific self-employed mortgages.
There are numerous ways self-employed individuals can prove to lenders that they are capable of paying their mortgage. You only need to jump through a few hoops to secure your mortgage. Lenders view you as self-employed if you own at least 20% of a business that provides your income. This can be a sole trader, a contractor or a company director.
How to get a self-employed mortgage
A self-employed individual looking for a mortgage has access to the same mortgages as employed individuals. However, they need to pass an affordability test from the lender as would any other borrower.
Since there is no employee to recommend them, self-employed individuals usually need to provide more evidence to show their financial capabilities than other borrowers. Mortgage providers can have very tight lending criteria. You need to convince them beyond doubt that you are perfectly capable of meeting your monthly repayments without fail.
Self-employed mortgages are not necessarily more expensive than standard mortgages. The only difference is the strict guidelines lenders follow when dealing with self-employed individuals during the application and decision process.
What you need to provide when applying for a self-employed mortgage
As proof of your income, there are a few documents you will need to provide when applying for a self-employed mortgage. They include:
- Business accounts dating back at least 2 years
- An annual tax overview for the past two years at least
- Contractors need to show proof of ongoing or upcoming contracts
- Dividend payments or profits evidence
The requirements can vary from one lender to the other. Most lenders will also require that you provide accounts prepared by a chartered accountant to be sure of your reliability. They mostly focus on your average profit over the last few years. Having a good credit score can go a long way in making it easier for you to get a mortgage approval.
For more information, get in touch with DNA today and our experienced brokers can explore all your mortgage options.