Even in these days of credit crunch, getting a mortgage if you’re self employed is not the trial that it used to be. It’s even possible to get a mortgage if you don’t have the best set of books. Traditionally, lenders would wish to see regular income guaranteed by employment. However as we have been seeing, the economy has changed with and more and more people have becoming self employed, not to mention that fact that even having a job is not that secure anymore. Whilst there are still specialist lenders who specialise in mortgages for the self employed, it’s probably true that most lenders will deal with self employed people. Your best bet to find this out is to seek out an independent mortgage adviser. In an initial half hour to an hour interview with one of these fine individuals you will find out an awful lot more about just what you could obtain, what products are out there and such like. Just a little piece of advice here, and paraphrasing Orwell, some independent mortgage advisers are more independent than others.
Being able to show that you’ve been involved in a particular industry for years can be an advantage. This is because lenders are still wedded to the idea of seeing how employable you are. This is a slightly bonkers example, but it proves the point – a plumber may well be in a better position than a successful film director as they would be able to show steady, weekly work. By contrast, the film director’s few months of work here and there would look more patchy. By the same token, being new to a particular area of business may prove a problem until you are able to demonstrate regular income. If you have a short term contract it would be advantageous for you to be able to show that you have regular such contracts with the same employer, obviously the longer that this history goes back, the better.
As I have hinted, mortgage lenders are cautious creatures and don’t always appreciate the ins and outs of different types of business. But this is changing, so do your homework and shop around, or get your mortgage adviser to shop around. It used to be the case that if you’re self employed and you wanted a mortgage, the lender would seek proof of your income, you’d need to show three years audited accounts or if you haven’t been in business for long enough the lender would accept a letter of confirmation from an accountant.
If you’re not able to show the three years accounts, you may have to pay a larger deposit, or go down the route of self certification. As discussed, historically, those of us who were unable to provide evidence of all their income have often found it difficult to get appropriate mortgages, either being offered mortgages that were too small, with punitive rates or even being refused completely.
Self Certification Mortgages
Self certification mortgages provide a solution for people whose full income cannot be guaranteed or suitably demonstrated. Although often associated with self employed people, self certification mortgages are available to people from all walks of life, regardless of their employment status. As the name suggests, a self-certification mortgage is just like a ‘normal’ mortgage except for the fact that you don’t have to prove your income. What is required instead is a signed declaration of your income and your ability to afford the mortgage for which you are applying. In return, your accounts are not checked, you don’t have to prove your financial or employment status and the only checks that will be carried out will be standard credit checks.
In going down this route however, please remember that standard mortgage warning, YOUR HOME MAY BE REPOSSESSED IF YOU CANNOT KEEP UP REPAYMENTS ON ANY LOANS SECURED AGAINST IT. Thinking that you’ve pulled a fast one by getting the loan approved, and then realising six months down the line that you can’t actually afford it is extremely sobering.