Self-employed

The impact of being self-employed clearly explained

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What is classed as self-employment?

 A mortgage lender will typically class a client as self-employed if they are one of the following;

  • Sole Trader
  • Member of a Partnership
  • Over 25% Shareholder in a limited company

If you are a day-rate contractor please also read this article as your income maybe assessed differently to other self-employed individuals.

​ Is it difficult to get a mortgage if I am self employed?

Prior to the credit crunch in 2007 self-employed people could access “self certification” mortgages with little or no proof of income.  However, since 2007 lenders have had to adopt a more responsible approach to lending and this type of mortgage is no longer available.    

 This has led many self-employed people to believe that it is now very difficult for them to arrange a mortgage and this is where professional advice is so important. For those that have 3-years of accounts and the income you generate is sufficient to afford the mortgage you want then there should be no issue in obtaining a mortgage. 

One of our mortgage brokers can help explain how your income will be assessed once they have reviewed your personal tax returns.  In some cases we will also inspect your company accounts if you operate as a Ltd company or partnership.

What if I have less than three-years of trading?

Bennison Brown work with a number of mortgage lenders who will often accept self-employed borrowers with just one year’s worth of accounts if you can prove you have contracts for the future and a consistent track record of work. There is also the option of putting down a larger deposit which often makes lenders more flexible.   

What are the pitfalls?

  

Not having the correct documentation available

 Every lender has their own criteria to determine what paper you will need to evidence for your income including how old the document can be and how many years history you need to provide. If you do not know this upfront you may find your application comes to a halt whilst you prepare the relevant information.

 

 Knowing what income to provide

 The actual figure a lender uses can vary. For example a limited company shareholder could use their salary and dividend payments with one lender, whereas another lender may be willing to use their salary and a % of the company net profit.  These figures could be drastically different and can have a serious effect on the amount you can borrow.

 

 Recent changes

 You may have recently changed from being employed to self employed, or you may have changed the structure of your self-employment, such as from sole trader to a limited company. Whilst this may be acceptable to some lenders, this will limit your options and not knowing if your employment history is going to be acceptable to a lender before an application may cause an application to be declined.

How to avoid the pitfalls?

At Bennison Brown we can give you help and guidance to help you navigate the mortgage market as a self-employed applicant. 

We have a deep understanding of lenders criteria and requirements, and we have also developed strong relationship with the lenders allowing us to discuss unusual cases with them before proceeding with an application. 

Our experience and expertise will help you avoid any of the pitfalls that you may encounter along the way.

Summary 

Whilst obtaining a mortgage can prove more difficult than if you are employed, Bennison Brown has vast experience in arranging mortgages for our clients who are self-employed. 

We have a thorough understanding of lender requirements in this area of the market. We will advise you on your options to make things as simple as possible and find and arrange the most suitable mortgage to meet your needs. 

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