It’s always been a little more difficult for freelancers, contractors and other self-employed individuals to get a mortgage. Since the recession of the late noughties, it’s become even more challenging to get one on a flexible income. Although there may be more obstacles in your way, it certainly doesn’t mean that it’s impossible. In this post, we’ll have a closer look at the whole issue, and how you can go about getting a mortgage as a self-employed individual.
The main difference which self-employed people need to be aware of is that you need to prove your income to any mortgage lender you apply to. Almost all of them will want to see at least two years’ tax returns or accounts. The more evidence you can come up with, the better. For you to have the best shot at the mortgage you want, you’ll need two years of account history, a professional accountant, the flexibility to make a decent deposit, a proven track record of regular work, as well as a healthy credit history.
There are a few different factors which come into play when lenders determine how much they’re actually going to lend you. However, one of the most significant is your average profit margins over the past couple of years. By and large, mortgage lenders will prefer borrowers who pay for an accountant. Many will require that the accountant is chartered and certified, so be sure to find out about this before contacting anyone. It may be worth looking at brokers who specialise in working with self-employed individuals, like Enness Private Clients. Most importantly of all, have a thorough look at your books before you consider contacting a single lender. Approach a broker with disorganised or out-of-date figures, and they may end up resenting you.
So, what if you need this mortgage, but you don’t have two years of accounts and you’re not prepared to give up on your self-employed career? Don’t panic, it’s not the end of the world! There are many lenders who will still consider your application, provided you can show a track record of consistent work, or you’ve recently left a full-time job in the same industry. Alternatively, if you already have a mortgage and want to re-mortgage in order to move or simply save money, then the lender you used last may be able to help you out. They’ll have records of you as a client, and know that you’re good for making repayments on time, compared to a lender who doesn’t know anything about your credit. As you can imagine, regardless of your proven track record, it will make getting a mortgage so much easier if you’re in a position to put down a large deposit or a significant piece of equity from an existing property. Furthermore, like any significant loan, a clean credit report will go very far with mortgage brokers.
If the prospect of getting a mortgage as a self-employed professional was giving you headaches, then I hope this post has cleared it up!