Lenders have become stricter towards the self-employed over recent years thanks to worries over cashflow, economic outlook, trade credit restrictions & the impact on a sole trader’s credit file that all these can have.
Crucial to the application is the unique & individual circumstances of the client. Their business & trading background, their overall financial position, their credit history and the property equity are all factors in the mortgage lender’s decision.
Some lenders require a full three years of chartered or certified accounts whereas others will accept an Accountant’s letter or certificate. As ever, this is an area where a specialist mortgage broker can help steer your application to the most favourable response so if you’ve been declined for a mortgage by a High Street lender, don’t despair, it doesn’t necessarily mean that there are no lenders out there that can help.
We have good working relationships with many of the High Street banks and building societies who work closely with us to ensure that where a case is possible we will source a suitable mortgage package for that potential client.
More Information on Self Employed Mortgages
With lenders tightening their lending criteria, self employed people often find it difficult to obtain the cost-effective credit that they need in order to buy a property.
A self-employed person is classed as someone who works for themselves or runs their own business, and who does not rely on a fixed salary through the Inland Revenue PAYE scheme.
With over three million people in the UK classed as self-employed, mortgages for self employed people were created by lenders to enable them to sell their products to freelancers & contractors. From Journalists to IT Consultants to Window Cleaners, they all fall under the self-employed category and require our individual approach to their individual & sometimes complex circumstances.
Self-employed clients can find it difficult to obtain normal mortgages because income can be very irregular and sometimes difficult to prove. Standard lenders regard this as a risk and either decline the application or offer unfavourable terms.
But we work closely with a number of mortgage companies that are still willing to consider mortgages for self employed people. In these instances, the lender looks at the individual borrower’s overall ability to pay off the mortgage, rather than just their earnings. These lenders understand the varied work patterns of the self employed and will take into consideration the job role, be it as a seasonal worker, contractor or someone who runs their own business.
As part of this application, the lender will look closely at the applicant’s credit score. A good credit history helps prove to the company that the borrower has paid off all debts in the past, on time and in full. The lender will also review any outstanding debts or credit cards that the applicant has. That said, we regularly deal with complex cases where the applicant has an adverse credit history and depending on the details & circumstances we can still often source a suitable mortgage so if in doubt, just fill in our quick quote form & see what we can do to help.
The lender has to be satisfied that the applicant is earning sufficient to service the mortgage but don’t forget that multiple sources of income can be considered such as part time jobs, working family tax credits, fostering allowances & investment incomes for example.