Getting a mortgage when you are self-employed can be notoriously tricky. Without the security of a regular income, or the guarantee of an employment contract, many self-employed homebuyers can find it difficult to find a lender willing to give them a decent mortgage deal.
As a mortgage broker that specialises in self-employed mortgages, Simply Lending Solutions have worked with us to come up with a quick list of 9 things you can do to boost your chances of getting a self-employed mortgage.
- Identify your self-employed status
Self-employed is self-employed right? Wrong. The type of your self-employment will affect the way in which lenders will approach your application.
For example, if you’re the director of a limited company different lenders may calculate your income in different ways. Some will take into account retained profits, others will look at dividends.
Whether you’re a director, a sole trader, a contractor (including CIS contractors) or in a partnership, understanding how lenders calculate your income can improve the chances of a successful application.
- Have up-to-date accounts
We all know how it is. However much you resolve to stay on top of things, it gets to your year-end and you, or your accountant, finally get around to sorting out your accounts.
If you’re thinking about a mortgage though it really pays to keep those accounts up to date as they are the best way to give prospective lenders a reliable representation of your current income. And think how much stress you’ll spare yourself at the end of the financial year!
- Get professional help
Hiring an accountant to do your accounts can seem like an unnecessary expense, especially for smaller businesses. Many lenders however will require that your accounts are signed of by a chartered or certified accountant. Even those that don’t would much rather have the added security professionally prepared accounts give.
- Talk to your accountant
Once you’ve decided to hire an accountant it’s important that they understand that you intend to apply for a mortgage. Accountants, quite reasonably and legally, may seek to reduce your tax burden by minimising your income. When you come to apply for a mortgage however you will want to show the highest income possible.
- Get professional help
No. We’re not repeating ourselves. As well as a professional accountant, use a professional mortgage broker who specialises in self-employed mortgages to handle your application, not a high street broker.
While you may only apply for 1 or 2 self-employed mortgages in your lifetime, a specialist mortgage broker does this every day, giving them an insight into what lenders are looking for, and which are the most suitable for the self-employed to approach.
- Get evidence of your earnings
Once you’ve submitted your self-assessment tax return you can request evidence of your earnings for up to 4 years from HRMC. These SA302 forms can be printed off directly from HMRC’s website using your online account, for up to 4 years.
There are specialist lenders who will work with 2 or even 1 years accounts. These will often need certifying by a charted accountant, which is another reason to work with a specialist broker, as they can advise of each lenders criteria.
- Don’t change your business structure
There may come a time when you consider moving from working as a sole trader to setting up as a limited company. Don’t do this during the period of any mortgage application. Keeping things simple and consistent is less likely to put potential lenders off.
- Don’t forget your personal finances
Keeping your personal finances in order will do your application no harm at all. Keep up to date on any loan, credit card or current mortgage payments, as well as avoiding ‘red flag’ financial activity such as pay day loans.
- Build as big a deposit as possible
Lenders love big deposits. If you can find a way to increase the amount of deposit available to you, this will help your broker find you a competitive deal.
While getting a competitive mortgage deal always depends on your individual circumstances, these tips could help make your application run a lot more smoothly. To get the best mortgage deal for you, talk to a specialist mortgage broker today.