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Self Employed Mortgages
There are hundreds of thousands of self employed people in the
UK. In the past, many found it difficult to get their hands on a
mortgage, as lenders made little effort to understand their
finances, but this has changed dramatically in recent years with
mortgages becoming much more available to the self employed
market.
Find the best Self Employed Mortgage for you
Most lenders now offer self employed mortgages, and an
increasing number of specialists exist. Bear in mind that the size
of mortgages and the interest rates offered to you may be
influenced by the type of work you do. For example, if you have
been working as a plumber for many years, you will probably be
regarded as a safer bet than a fledgling musician, if you can
demonstrate regular work. So a greater range of self employed
mortgages will be available.
If you're on a short term contract, it will work in your
favour if you have been with the same employer for a reasonable
period of time, and had your contract renewed. The longer the
contract, the better.
Get Self Employed Mortgages Advice
If you are in the market for a self employed mortgage, your
financial circumstances are likely to be more complex that your
employed counterparts. It can make sense to consult a mortgage
broker who can search the market for the most appropriate self
employed mortgage for you.
Self Certification: Self Employed Mortgages
Self certification is a simple way of detailing your income if
you are self employed, as you simply self declare what you earn
and the lender will not insist on seeing audited accounts.
Self Cert Mortgages
Many self employed mortgage lenders will ask to see three
years' audited accounts, so if your business is younger than that,
a self-cert mortgage (or self certified mortgage) may suit your
needs instead. Note that self-cert mortgages may be charged at
higher interest rates than standard self employed mortgage deals.
Proving Your Income
This is how self cert mortgages should work, but there are
still some lenders who will need you to prove your income in other
ways, such as with an accountant's certificate.
This is a document signed by your accountant to say that
your income is sufficient to service the loan requested. You may
also be asked to produce your business bank statements for a set
period so the lender can look at the gross income you have
received.
Most lenders will supplement this information with credit
searches. If you are a home owner, you will be asked to supply
your existing mortgage statements, and if you are renting the
lender will ask for a reference from your landlord.
The self cert mortgage approach has limits - some lenders
will only allow you to prove your income in this way if you want
to borrow less than 75% loan to value, so you will need to put
down a substantial deposit. However, some lenders may allow you
borrow up to 95% on a self certification basis.
Note that some self employed borrowers who want to take out
a mortgage in a hurry use a self cert mortgage as a way of
speeding up the process.
Pros and Cons of Self Certification Mortgages
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Self cert mortgages give many self employed
people access to finance that they could not
otherwise get. |
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However, these deals are seen by the lender
as more risky than standard mortgages, and so
they are charged at slightly higher interest
rates as a result. |
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Self Employed Mortgages from Mainstream Lenders
If you are self employed, have more than one source of income
or work on short-term contracts, you may have difficulty getting a
mortgage from a mainstream high street lender.
But do not despair. There are plenty of options available to
you. Most banks and building societies have a specialist arm
dedicated to providing mortgages for the self employed (among
others).
A full range of rates should be available to you: fixed,
capped, discounts, trackers and flexible deals.
To prove your income you will have to get your accountant to
provide up to three years' worth of audited accounts. These should
show that you can afford to repay the mortgage based on your net
profit.
If you have been trading for less than three years you could
run into problems, or if your accounts have shown a downturn in
any of the past three years some lenders may not offer you a
mortgage. In addition, some lenders will take an average of the
past three years' income rather than just looking at what you have
earned in the current year.
If you have difficulty proving your income, a self-cert
mortgage may be the answer.
A mortgage adviser or broker could be your quickest and
easiest route, as they know which lenders offer mortgages for self
employed borrowers, which products they offer and what their terms
and conditions are.
Self Employed Mortgages Pros and Cons
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These days, there are plenty of specialist
lenders that offer a full range of mortgages for
self employed borrowers. |
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The choice is still not as large as for
your employed counterparts. |
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For more information or to discuss your particular
requirement, click here to contact us. |
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