If you’re a business owner or self-employed, it can be tricky to get a mortgage for that dream property. Self-certification mortgages no longer exist, and these required little or no proof of income and were designed with self-employed persons in mind. Lenders are less willing to cover the self-employed, particularly after the financial crisis, because it’s not always clear how much of a risk these people pose to loan companies. Some lenders view the self-employed as making a ‘non-standard’ income that, in itself, is deemed risky. However, it is possible to secure a mortgage as a self-employment person or a business owner. Read on to learn how.
You will be classed as self-employed if you own more than 20 or 25 percent of a business, and you will need to prove the income you’re declaring. This means that two or three years’ worth of accounts should be submitted as evidence, usually prepared by a qualified accountant. Lenders will need to ascertain that you will continue to earn similar sums over the coming year. If you’re a partner in a business, you’ll be treated the same way as a self-employed borrower. For directors of limited companies, you must show evidence of your total income using both salary and dividend payments.
Tips and Tricks
It’s very important to keep your accounts up to date. This may mean that you have to hire an accountant, if you haven’t done so already. The accountant should be certified or chartered. Although it’s easier said than done, to give yourself the best chance of securing a mortgage, you should make a commitment to increasing your company turnover and profits. A good-sized deposit will also be helpful, and if it’s not possibly to increase your company profits, it’s best to keep them consistent. It’s not advised that you switch your company type before you apply for a mortgage (for example, switching from a sole trader to a limited company) because this can make your application process significantly more difficult.
Who Should I Borrow From?
It’s a good idea to research the offers available from smaller building societies, as these are often more flexible and forgiving to self-employed borrowers than larger banks. Other brokers like Rite Mortgages will offer a specialist service for self-employed customers, so it’s definitely worth considering these alternative options before making a financial commitment.