The number of people who are self-employed has increased dramatically since 2001, jumping from 3.3 million to 4.8 million. Do their precarious earnings mean they can’t get mortgages? Will they be treated as second-class citizens by the lenders? Don’t give up hope: those who have more dependable earnings, and, crucially, good records of their income, can still land a decent deal.
Firstly, let’s demolish the myth that there is a category of loans called the “self-employed” mortgage. People who work for themselves are able to get the same rates as everyone else; the problem is, they have more complex incomes and must be able to prove their earnings.
Ultimately, when assessing a self-employed mortgage applicant, a lender needs to make a judgment on two areas: How much is this applicant earning? And how confident are we they will sustain that level of earnings? In general, the longer you’ve been self-employed, the better. If you have two years of accounts, you’ll have more choice of lenders; three years is even better. Most lenders insist accounts are prepared by a chartered or certified accountant.
A lot comes down to the specific circumstances of the case as to whether a specialist product, that is likely to carry a slightly higher rate, is required, or whether there could be a more mainstream option. For example, if there was a history of employment in the same business before switching to contracting, some lenders may be able to take a look.
If you would like some help from Ellis Winters & Co. to put you in touch with a well-established mortgage advisor, contact our team today!