Self Employed Mortgages
One of the misconceptions about the mortgage market is that it is now very difficult for self employed people to get a self employed mortgage loan in order to buy a home. It’s certainly true that one type of mortgage used by the self employed in the past (self certification mortgage) is no longer available – but for many self-employed people, their chances of being able to borrow are still just as good as anyone else’s.
In any case, the products in question – known as self-certification mortgages – have been outlawed because lenders and borrowers alike were abusing them. The loans, which enable people to borrow without having to prove their income, were originally aimed at a tiny minority of self-employed people with special circumstances, but ended up being sold much more widely.
What was a self certification or self cert mortgage?
Self-certification mortgages, also known as ‘self-cert’ mortgages enabled individuals to borrow without needing to prove their income. They were removed from the market by the Financial Conduct Authority back in 2014, because it was felt that they were not suitable for the general market and presented a risk for the consumer.
However just because self-certification mortgages are no longer available doesn’t necessarily mean it’s really difficult for self-employed people to get a mortgage. As long as you can prove your income as a self employed person in theory you have access to exactly the same range of mortgage products as everyone else.
Options for self employed mortgage borrowers
In theory, self employed borrowers have access to exactly the same range of mortgage products as everyone else. The key is that you will have to be able to prove you have the income necessary to make the repayments on the loan for which you are applying.
Typically, that will require you to have at least two years’ worth of company accounts, SA302s or tax returns – to show to lenders (though a few may request three years’ worth). If you are self employed as a Contractor you may also have to provide evidence of work you have already lined up for the future, in order to show that your current levels of income can be maintained.
However, even if you don’t have two years’ worth of records, you may still be able to get a mortgage. Self employed workers who have a regular track record of contract work may be able to use this to their advantage. Also, if you already have a home loan, but wish to remortgage – to move home or simply to get a better deal – your existing lender may be more sympathetic, especially if you have a good history of making repayments on time.
Which mortgage will I get?
There are a handful of specialist lenders who offer products designed specifically with the self employed in mind. But mainstream mortgage lenders routinely lend to the self-employed too and you may not need to use a specialist.
You should have full access to the choice between fixed and variable rate mortgages including tracker mortgages, so there’s no reason to worry about this. If one lender’s request is overly onerous, consider looking elsewhere. And always shop around for the best rate, since some lenders feel more comfortable about self-employed borrowers than others.
Help for the self employed borrower
There are certain traps that self employed mortgage borrowers need to watch. For example, your accountant will see it as part of his job to minimise your tax bill using legitimate methods to reduce your taxable income – but this could count against you when applying for a mortgage. Also, many self employed people also earn money through the PAYE system, which can make their business income seem lower.
For these reasons – and given the other challenges they may face when applying for a mortgage – it’s really useful for self employed workers to take impartial and expert advice on getting the best possible mortgage deal.
Want to know more?
Call the self employed mortgage experts at Mint FS today on 0330 1355914 for an initial consultation – we will be happy to talk through your options. Alternatively complete our contact form and we will call you back.