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The Documents Needed For A Self-Employed Mortgage

Mortgages lenders are actively embracing people who work in the gig economy. Just look at the stats – in 2016, the number of mortgage loans taken out by self-employed workers increased by 11% whilst loans to employees grew by just 6%. Read more

What Documents Do I Need For A Mortgage?

When applying for a mortgage it is a good idea to sort out all the paperwork you’re going to need ahead of time. We’re not going to lie – it’s a pretty boring task, but the quicker you get it over and done with, the quicker GIGLY can deliver your mortgage and you can move in to your dream home!

What you will need will depend on your specific circumstances and the lender you are going through. The GIGLY checklist is however, a good starting point from which to build on.

Identification

GIGLY carries out electronic identity checks on each applicant, but all mortgages require you to provide proof of identification and address. This is to prevent sneaky money laundering schemes. You have to show a current, valid original document – not a copy or expired version. Below are some examples of what counts as valid identification.

Photographic ID

  • A valid current passport
  • A valid photocard driving licence

Proof of Address

  • A utility (gas, electricity, water, etc) bill that is dated within the last 3 months. Note – lenders, do not accept mobile telephone bills
  • Your council tax bills for 2017/18
  • A bank statement dated within the last 3 months

Show Where Your Deposit Is Coming From

All lenders need to see where your deposit is coming from, whether it’s from your savings or a gift from someone else. Proof should be presented in the form of bank statements, lenders can be very fussy as to how these statements are presented so we recommend scanned copies that include your name and address.

You can find your bank statements by logging into your online banking and clicking ‘statements’ from the menu.

Documentation

Each mortgage is unique and will require specific pieces of evidence, so we have listed the necessary documents below dependent upon what type of work you do, and what mortgage you are looking for.

Contractor

  • A copy of your current contract
  • Three months worth of personal bank statements
  • Proof of Deposit (Bank statement showing the funds to use)

PAYE

  • Three months of payslips & your latest P60
  • Three months worth of personal bank statements
  • Proof of Deposit (Bank statement showing the funds to use)

Self Employed/Freelancer

  • SA302 & Tax Year Overviews for the last three years (Documents produced from HMRC which confirm the applicant’s taxable income for each tax year). The tax year ends 5th April each year so for mortgage applications we now need documents for 2015 – 2017
  • Three months worth of personal bank statements
  • Proof of Deposit (Bank statement showing the funds to use)

Zero Hours Contractor

  • You must have been in your current position for a minimum of twelve months and able to provide twelve months worth of payslips (or fifty two weekly payslips if you are paid weekly)
  • Three months worth of personal bank statements
  • Proof of Deposit (Bank statement showing the funds of use)

So there it is – the documents you’ll need to provide to get a mortgage. Time to start rummaging through the filing cabinet!

 

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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

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