Self-employment mortgages are specifically designed for individuals who work for themselves, such as freelancers, contractors, sole proprietors, and business owners. Unlike traditional employees, self-employed individuals do not have a regular paycheck, which can make the mortgage application process more complex.
Self-Employed and Contractor Mortgages
Many people wonder if it’s feasible to secure a mortgage when self-employed or working as a contractor. The good news is that self-employed and contractor mortgages are available, and lenders do accept such applications. The key to obtaining a mortgage lies in proving your income through regular amounts declared in your tax calculations. Additionally, the size of your deposit and having a good or excellent credit score will significantly assist in your application.
Increasing Your Chances of Approval
To improve your chances of getting a mortgage, you need to present yourself as an attractive candidate to lenders:
Larger Deposits: The bigger your deposit as a percentage of the loan, the better your chances.
High Credit Score: A higher credit score increases your likelihood of acceptance. Regularly review your credit profile and ensure its accuracy. Aim to avoid late payments, defaults, or CCJs, as these can significantly reduce a lender’s willingness to offer you a mortgage.
Proof of Income
Lenders will only consider income that has been declared and verified through the Inland Revenue. Ideally, you should have two years of provable, taxable income. However, some lenders might accept one year of trading plus projections. If you’re unsure, it’s best to consult with professionals.
Professional Assistance
Using a professional mortgage broker can greatly improve your chances of having your mortgage application approved and offered. Our expertise and knowledge of the market can guide you through the process, ensuring you meet all necessary criteria and present the strongest application possible.
Key Features of Self-Employment Mortgages
What is a Self-Employment Mortgage?
Self-employment mortgages are designed for freelancers, contractors, sole proprietors, and business owners.
Income Verification
Lenders require proof of stable income over 2-3 years, including tax returns, business accounts, and profit/loss statements.
Higher Documentation Requirements
Extensive paperwork such as personal and business bank statements, proof of ownership, and evidence of ongoing work/contracts.
Mortgage Options
Access to fixed-rate, variable-rate, and interest-only mortgages, with differences in income verification.
Challenges
Proof of Income Stability: Consistent earnings records over multiple years. Higher Deposit Requirements: Typically 10-25% of the property’s value. Credit Score and History: Good credit score required. Specialist Lenders: Some lenders offer more favorable terms for self-employed borrowers.
Benefits
Tailored Solutions: Flexible terms for fluctuating incomes. <br> – Access to Various Products: Wide range of mortgage options. <br> – Competitive Rates: Potential for competitive interest rates with proper documentation.
Steps to Improve Approval Chances
Organise Financial Documents: Detailed and organized records, accurate tax returns. Increase Your Deposit: Save for a larger deposit. Maintain a Good Credit Score: Regularly check and improve credit score. Consult a Mortgage Broker: Specialised brokers can guide and connect you with suitable lenders.
