Finding a mortgage deal when you’re self-employed can be tricky. As many as 71% of self-employed people said they felt discriminated against due to their employment status when applying for a mortgage, according to a recent survey.
Traditionally, mortgage lenders would require you to have been trading for at least three years before you could be considered for a loan. This is because it is more difficult to establish a person’s income without this information, and consequently harder to assess the level of risk involved in lending to them. However, it’s now entirely possible to find a mortgage deal, even if you’ve been self-employed for only a short period of time:
Who will lend to someone newly self-employed?
It used to be that only a select few lenders would offer loans to self-employed buyers, however, more and more lending organisations are now considering them. These range from well-known high street lenders to smaller, more niche companies. The lenders likely to accept your mortgage application will vary depending on your personal circumstances.
How long do I need to have been in business?
Many mortgage lenders will consider applicants with as little as one year’s accounts, provided that they have completed and filed a tax return for their first year’s business. However, if you’re still in your first year of trading, it may still be a good idea to apply; decisions on mortgage applications can take up to three months to complete, so applying early is an option. If you apply before the end of your first year, lenders will use your projected income to determine how much they are willing to lend you. Whilst not wholly accurate, this will give you a good idea of the amount you’re likely to be able to spend on a property.
How much can I borrow?
Self-employed buyers can borrow roughly the same amount as those who are employed. This is usually around five times your annual income. There are some lenders who may be willing to increase the maximum amount available to you, but this will be dependent upon your personal circumstances and proven affordability.
What if I have a poor credit history?
Provided that the property you’re looking at is deemed to be affordable to you by the lender, you should still be able to secure a mortgage offer, even with a poor credit rating. However, you will almost certainly need a healthy deposit to put down (usually around 15%). The only issue will be if you have CCJs or mortgage arrears within the last two years, as this will severely hinder your ability to acquire funding.
If you’re self-employed and looking to secure a mortgage, we can help you find the best deals. Key Mortgage Advice have access to the whole of the mortgage market, so whatever your circumstances, your best offer is here with us! Book a free, no-obligation consultation today:
