‘Content correct at time of publishing and subject to change’
Sadly, a self employed mortgage is not as straightforward as it may sound. Securing finance as a self-employed person can be very challenging. No matter your income, self-employed borrowers generally find it harder to secure finance in the UK, especially.
It is worth keeping in mind that if you’re looking for an interest-only mortgage or you have a higher loan to value mortgage, this could cause complications and delay the process even further.
What is a self-employed mortgage?
‘Self-employed mortgages’ aren’t actually separate mortgage products that are only available to self-employed individuals. Additionally, self-employed borrowers are also not excluded from accessing mainstream mortgage products.
On the other hand, it is usually much harder for self-employed people to secure a mortgage. This is usually due to the way in which self-employed individuals’ affordability is assessed. For PAYE employees, it’s much easier to calculate your mortgage affordability, usually from payslips that indicate your annual salary.
Whereas, for self-employed individuals, this is not as straightforward. This is usually because you’re unlikely to receive a monthly salary, rather your income comes from dividends or director’s loans. On top of this, your earnings are likely to fluctuate year on year, so establishing an annual salary can be hard for lenders.
Things to keep in mind
Overall, lenders may struggle to work out how much you can borrow based on how much you earn and how much it fluctuates. Due to the instability of income, lenders will find there is much more risk on their behalf. Keep in mind that if you’re a sole trader with several years of accounts, you shouldn’t struggle too much to attain your mortgage. But if you’re self-employed through a limited company and drawing in income in a more unconventional way, you can assume that you will have some trouble completing your mortgage application.
If you’re self-employed and looking for a mortgage, you should make sure to use a highly respected broker to deal with this process on your behalf. An experienced broker will know the usual obstacles to overcome during the mortgage application process and will thus be able to hopefully foresee these issues and halt any delays. Your advisor will also have a strong relationship with many lenders and an accepted application is much more likely coming for someone the lender already trusts.
If you’re self-employed and looking for a mortgage, don’t hesitate to get in touch with Twin Pine today.