In the current business climate, there has never been more self-employed people than there is today. Over the last decade, the numbers have dramatically grown but despite this, the mortgage market has failed to get on board with this shift as the self-employed continue to face difficulty when trying to get their foot on the property ladder.
The days of self-certification mortgages are a thing of the past and no longer is it enough to just prove to your lender you can afford it. Due to the new regulations that were introduced in 2014 regarding affordability rules, the unfortunate reality for these aspiring home owners is that whilst your income is classed under the ‘non-standard’ category, lenders will always be hesitant – especially if it is a relatively new business. Regardless of whether you can afford the mortgage, the lender doesn’t have that assurance as they can often struggle to assess your situation as the self-employed bracket covers a range of different income levels.
What’s At Stake?
Essentially, you’ll have the same opportunities as a regular home buyer, but you’ll have to put in some extra work to prove your income. Fortunately, there are now a few specialist lenders who offer self-employed product specific mortgages. Mainstream lenders will typically hear your case but you’ll have to put additional work in to prove your eligibility.
How to Improve Your Chances?
1. Keep Accounts & Transaction Records
More often than not lenders will judge how much they want to loan out to you dependant on your income average over a select amount of years. As a result, it’s crucial to keep your accounts in order. Whether you get an accountant or get your records today’s, you’ll need to enter and file every transaction made under business operations. If you’re unsure on how to manage taxes and figures, it will pay to invest in an accountant as you may be asked to explain certain fluctuations so they can better understand your position.
2. Seek Advice from A Mortgage Advisor
A broker who specialises in mortgages will know which lenders are more lenient towards self-employed professionals. They’ll be able to help you get your loan application together as this is something you don’t want to mess up as applying for a mortgage and having it refused will damage your credit score. They’ll advise you whether you’re in the right position to apply in the first place or what you should do in order to improve your application so it isn’t rejected.
3. Bolster Your Income
Keeping profit within your business is a smart move and a sign of a steady business owner. It may not demonstrate a healthy income which is what your lender may be looking for so consider paying yourself a higher dividend before applying for the mortgage. This will help you to boost the look of your mortgage application.
4. Get Your Finances in Order
Around a year before you plan to apply, get your finances in order – that means keep your spending under control. Try to pay off any outstanding debts left that you may have and make sure your credit report is correct and healthy. All of this stuff will be checked thoroughly so if you want a successful application you’ll need to get everything in order.
First of all, congratulations if you’ve had your application approved! It can be a long drawn out process so after it is all done and you’ve been deemed successful, you’ll be glad to know you’re on the home stretch. Depending on how you’ve gone about the process, if you’ve just found your house, you’ll now be looking to buy it. It’s at this very stage that you should start looking to seek the help of conveyancing solicitors to help you with your purchase. They’ll be best placed to get you a good offer and save you money during the process. Then, all being well, you should be able to finally have your very own property as a self-employed professional!
(Bio: Alice Porter is an avid writer who has conducted research with a conveyancing solicitors to broaden her knowledge on mortgage trends and the housing market.)