Mortgages For The Self-Employed

Mortgages For The Self-Employed

Do You Fit The Self-Employed Definition?

A person is self-employed if they run their business for themselves and take responsibility for its success or failure. Self-employed workers aren’t paid through PAYE, and they don’t have the employment rights and responsibilities of employees.

Source: GOV.UK

If this sounds like you, then GIGLY is the company you need to help you make the most of your job status. Whether you’re looking for a mortgage, a new job, accountancy, training or business coaching, we can get you where you want to be.

The gig economy is booming right now, and the number of UK citizens classed as self-employed is also growing.

Just look at the Office for National Statistics for evidence – since 2016, the number of self-employed workers in the UK has risen by 148,000 to 4.8 million overall. The ONS also found that there are now 908,000 people on “zero-hours contracts”.

The Gig Revolution

In the wake of this gig revolution, self-employed workers are rightly asking if they can finally get the mortgages they deserve. While it is a challenge to the status quo for lenders, the sheer number of self-employed workers means they are being forced to lower their borrowing barriers.

Your Move, Lenders

As the gig revolution evolves we are seeing big lenders like Halifax, Barclays and Clydesdale adjusting lending criteria; and building societies such as Ipswich, Newcastle and Saffron accepting applicants without a guaranteed monthly income. Though a positive start, many of them could do more to modernise their practices.

Members of The Building Societies Association agree that the nature of employment is undergoing radical change. Ipswich Building Society have documented their research on this, and – aware of growing concerns over self-employed mortgages – state that they “promise to consider each and every mortgage application individually”. Promising, but a little vague.

However, the bigger banks are prepared to lend up to 85% of a property’s value to someone who classifies themselves as self-employed for a standard loan, so long as the borrower can prove they have been continuously employed.

Any break in employment could cause issues, so keep an eye on your holidays. Some lenders won’t begrudge you taking a holiday during a gap between contracts, but others don’t understand.

How Do I Get A Mortgage?

Lenders give money to people unlikely to default on their monthly payments – low risk options.

If you are self-employed, you need to provide evidence of a steady income over a certain period. Your income might fluctuate week to week, month to month, but if there is clear stability in the long run, you should be fine.

Lenders will usually assess self-employed income in one of three different ways depending on whether you operate as a sole trader, partnership, or as a limited company.

  • For a sole trader, lenders look at the net profit of the business.
  • For partnerships, they’ll look at each partner’s share of the profit.
  • If you’re the director of a limited company, lenders look at your salary plus dividends.

Dividends can make up a major part of your income if you run your own company, so always make sure your lender takes both into consideration.

Documents Check List

  1. Proof of Deposit
  2. 3 years SA302 & Tax Year Overview
  3. 3 months personal bank statements

When determining how much to let you borrow, lenders base their calculations on your average profit in the past few years.

They prefer borrowers to employ an accountant to prepare their accounts. Some lenders state the accountant must be certified or chartered – so bear this in mind when choosing one.

A squeaky-clean credit record will also boost your chances of getting a mortgage, so use an online credit checker to polish yours up. Taking these steps will give you the best possible chance of having your mortgage application accepted.

 

 

References

  • Self employed and contractor definition via GOV.UK

Photo by Toa Heftiba on Unsplash