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Mortgage Information - Mortgages for the Self Employed

 

Mortgages for the Self Employed - Mortgage Information

 

What is a Self-Employed Mortgage?

There are millions of self-employed people in the United Kingdom and many of these people may have a problem finding a mortgage. Those in standard full-time employment are basically guaranteed to be paid, and can get references from their employer as well as be able to show their payslips therefore proving their income. Mortgage lenders like this as it cuts down their risks.

If you are self-employed or working on a short-term contract, you could be financially solvent, and able to keep up payments easily, but that doesn't make it easy for you to provethat you will keep up payments to your mortgage lender. They want to know that that you will be able to keep up payments for a full term, usually 25 years, not just over the next year. If you are on a short-term contract, you are not guaranteed to get another contract, and should you be self-employed you have to chase payments that are due to you and are working on contracts as well.

Mortgage lenders will want to see three years audited accounts from a certified accountant before they consider a mortgage for the self-employed. Even if you have this, your accountant may have helped you avoid tax by understating your profits for the past few years, and this could come back to haunt you. If you do not have three years accounts you may be able to get a self-certification mortgage by declaring your income. You have to provide a certificate from your accountant for your last few years mortgage statements etc, and you are still not guaranteed a mortgage.

Some specialist mortgage lenders have targeted the self-employment mortgage market by providing some solutions that offer a more flexible approach to match the working pattern of someone who is self-employed. This means that they accept that when you are self-employed you may enjoy periods of high income but you may also suffer from periods of low income. Your mortgage should reflect that, enabling you to overpay and underpay when you need.

Mortgage lenders actually used to be more flexible, they offered self-certification loans and non-status loans where your financial status wasn't confirmed by an employer. But they rarely do this now, and their lending criteria has been tightened up. You will need to show an upturn income every year and probably business plans for the future. You will also need to provide a large deposit as you are likely to be lent only up to 75% of the value of your home.

You should look out for the specialist mortgage lenders who don't penalise you for your lack of status, trust your accountant, and might offer you up to 95% of the value of your home.

List of Major Mortgage Lenders

 

OCIS provide general financial information, we urge you to consult an Independent Financial Adviser ( IFA )
before making any important decisions about your finances.

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