self employed mortgage guide

If you are self employed you may think that it is too difficult to obtain a mortgage. But don’t give up hope just yet as we have some excellent advice for you on how to get one. More and more people are becoming self employed these days. In the United Kingdom there are almost 5 million self employed according to the Office for National Statistics.

When you can show regular income as a self employed person and have 3 years worth of accounts to back this up you should not have too much of a problem getting a mortgage. But what if you are not in this situation? For a lot of self employed people their income varies from month to month.

You will not pay more for your Mortgage being Self Employed

Let’s get this one out of the way to begin with. Some people believe that self employed people have to pay a higher rate for their mortgage. This is not true. You will certainly need more paperwork to confirm your income but you can have the same deals as everyone else.

The exception to this is where a lender in the high street rejects your application for a mortgage. You may find that you will have to use the services of a specialist mortgage broker that deals with self employed people and they will charge you a fee.

What you need to do about Income Proof

You will have to provide a great deal more paperwork than an employed person would. There is no employer to confirm your income so the lender will want to see all of the necessary paperwork. If you have been self employed for a long time then it will be easier. A lot of lenders will reject an application if you only have a year’s worth of accounts.

It is always better if a certified or chartered accountant has prepared your accounts. You will also need to furnish tax return documentation so that the lender can see what income you declared and the tax that you paid.

If you have only recently become self employed then there is still a chance of obtaining a mortgage. But it is not going to be that easy. There are specialist lenders that will accept a mortgage application from you. You will need to provide proof of regular income and show any future deals as well.

Do this to Increase your chances

Lenders will be more interested in your mortgage application if you have a large deposit to put down. This will also help with securing the best possible rates so that you pay less with your monthly repayments.

The other important issue is your credit report. If you have a good report then your chances will rise significantly. When you own a business your personal and business credit rating come under scrutiny. If you have credit history issues then fix them before applying for a mortgage.

So to summarise you will be in the best position for a mortgage when:

  • You have more than a one year history of self employment
  • An accountant has prepared your financial records
  • You provide your recent tax return
  • Proof of current and future income
  • A large deposit
  • Your have good personal and business credit ratings