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Last Updated: 23rd August 2023
Self-employed mortgages, often referred to as freelance mortgages or self-certification mortgages, cater specifically to individuals who work for themselves.
Unlike traditional mortgages that focus on steady employment income, self-employed mortgages take into account your unique income streams, offering more flexible criteria to suit your financial reality.
The advantages of self-employed mortgages go beyond flexibility:
Income Flexibility: Self-employed mortgages acknowledge the fluctuating nature of your income, allowing for a broader range of income sources to be considered.
Tailored Criteria: Lenders understand that self-employment comes with its challenges and rewards. As a result, self-employed mortgages feature more flexible underwriting criteria that align with your entrepreneurial journey.
Recent Ventures: If you’re a newcomer to the world of self-employment, don’t worry. Self-employed mortgage solutions consider projected earnings, business potential, and industry expertise, making homeownership achievable for newer ventures.
Enhanced Borrowing Capacity: By considering various income sources, self-employed mortgages can potentially allow you to borrow more than a traditional mortgage would, giving you more flexibility in your property choices.
Competitive Interest Rates: Contrary to misconceptions, self-employed mortgages often come with competitive interest rates, ensuring that your homeownership journey is not only flexible but also financially sound.
To successfully secure a self-employed mortgage, you’ll need to address several key requirements:
Income Stability: Demonstrating consistent income is vital. Lenders want to see at least two to three years of financial records, including tax returns and business accounts, showcasing your reliable earnings.
Documenting Your Earnings: Comprehensive documentation, such as bank statements, invoices, contracts, and other income sources, helps lenders verify your financial claims and establish your income reliability.
Responsible Debt Management: A manageable debt-to-income ratio indicates your ability to manage mortgage payments alongside existing debts, positioning you as a financially responsible borrower.
A Strong Credit Profile: A solid credit history and score enhance your mortgage eligibility and can lead to more favourable terms and interest rates.
Considerable Deposit: While the typical deposit ranges from 5% to 20% of the property’s value, a larger deposit demonstrates commitment and can improve your mortgage terms.
Partnering with a mortgage advisor like Mortgage Experience, who specialises in self-employed mortgages can make a world of difference. We understand the unique challenges you face and can guide you through the process, helping you understand lender criteria, comparing mortgage products, and optimising your application.
Self-employed mortgages provide the flexibility and tailored criteria needed to support your unique financial situation. By demonstrating income stability, responsibly managing your finances, and collaborating with experienced advisors, you can confidently embark on your journey to homeownership.
Getting any kind of mortgage can be stressful enough. Working with a specialist mortgage broker can help you get access to unique deals, as well as expert advice.
Yes! Self-employed or small business owners can absolutely secure a mortgage. But getting on the property ladder and finding the right mortgage that suits your income and circumstances can sometimes be tricky. Lenders require proof that not only are the monthly repayments affordable, but that you will be able to make them in the future. Self-employed people present a higher risk when it comes to income, which can make lenders hesitant.
Banks and lenders will see you as self-employed if you own more than 20% to 25% of a business, if that is where you earn your main income. You could be listed as a contractor, sole trader, or director.
In most cases, you will need to have at least nine to 12 months of trading under your belt before you are able to apply for a self-employed mortgage. Most lenders will want to see at least three years of trading history.
Self-certification mortgages allowed self-employed workers to declare their income without proof. Following the 2008 credit crunch, self-certification mortgages largely disappeared from the mortgage market. In 2014, they were banned by the Mortgage Market Review (MMR).
As we’ve explained above, there is no special ‘type’ of mortgage for the self-employed. As long as you are able to provide enough detail and information into your monthly income, savings, and future work pipeline, then there is no reason why you shouldn’t have access to the same mortgage as a full-time employee.
If your business was hit by the COVID-19 pandemic, or perhaps you don’t have as much information detailing your finances as high street lenders would like, using a specialist mortgage broker can really open up your options. Here at Mortgage Experience, our brokers work to find the best deal to suit your circumstances, and will be able to access exclusive deals you won’t find elsewhere.
With a Mortgage Experience adviser on your team, you can sit back and relaxed, safe in the knowledge that we will be doing all the heavy lifting to find you a suitable self-employed mortgage. This gives you more time to do the other important things in life.
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