5 mortgage tips for the self-employed

5 mortgage tips for the self-employed

It’s a common belief that if you’re self-employed, the odds are against you when it comes to obtaining a mortgage. While it may be true that the process can be slightly more complicated, it doesn’t mean that you should rule out your chances. 

To help you along, here are 5 mortgages tips for anyone who is self-employed and looking to obtain a mortgage. 

  1. Plan in advance and get your accounts ready

Many lenders will look for reassurance that freelancers or business owners will be able to continue making payments every month. Due to COVID-19 lockdowns, they’ll particularly be looking at businesses’ sustainability during the past lockdown and since we have slowly been coming out of lockdown.

Generally, lenders need a minimum of two completed years of trading and tax documents from anyone self-employed. And as anyone with a small business will know, pulling this information together can take a while. 

You might also need to give more information about the nature of your business. This is not a job you’d want to rush as you need to ensure you tax payments are up to date, and your tax returns have been submitted on time. Getting organised is an important way to prepare for a mortgage application.

  • Expert Advice

The amount of work you’ll need to do to prepare for applying for a mortgage is significant. It may take up a lot of your time. 

Mortgage advisers may be able to do a better job, in a fraction of the time. It might just help to keep your bank account in check during the process.

  • Find the right lender for your needs 

When it comes to loan applications, there are likely to be a few hurdles to jump over if you’re self-employed. And finding a lender which caters to your unique circumstances is not always the one with the cheapest rates. 

Every lender has a different criteria and affordability. Finding the right one for you is important and it could mean breaking away from your current bank or building society. 

While it might be tempting to simply apply to the lender with the cheapest interest rate as of course you want to pay the lowest possible rate. However, sometimes the lowest rate isn’t necessarily available to you. This is likely to be because you may not fit the criteria. 

  • Boost your credit file 

Having the best possible credit file is always important when applying for a mortgage, self-employed or not. There are 3 main Credit Reference Agencies in the UK, and it is important that you and your broker know what data they hold about you and what you are sharing with any lenders. 

There are some simple tips you can follow to ramp-up how much your credit is worth.

Tip one is to make sure you are registered to vote and are on the Electoral Roll where you are living. Also ensure that all your addresses have been updated with banks, providers, and utilities for any bills and statements.

  • Be self-employed for at least one year before you apply

When you freelance, you essentially become your own business. And because there’s no guarantee that you’ll get work and a steady income, lenders usually want to see that you’ve got a bit of history under your belt. 

Lenders will want to be confident and see that you can sustain an income throughout the year and be able to afford your monthly mortgage repayments. Therefore, you’ll normally need two full years of being self-employed, before lenders will consider you. This could be through freelancing or becoming a business owner.

There are some lenders that will consider an application with a minimum of one-year self-employment with accounts and tax returns finalised and submitted. However, most lenders would require two years as a minimum.

https://www.hl.co.uk/news/articles/self-employed-5-expert-tips-to-help-get-a-mortgage

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