For people who are self-employed, getting the first foot on the property ladder can be daunting and infuriating in equal measure. Since the recession in 2007 and the removal of self-certification loans, self-employed workers have found it near impossible to get a mortgage approval.
As there is no such thing as a self-employed mortgage, workers have to apply for a regular mortgage. They can find themselves in a never ending spiral of proving that they are earning enough income to support a home, and will usually be asked to produce at least two years’ worth of accounts and or a business plan by the lender.
If you’ve been trading for less than two years or took a little time to build your business initially, this puts you in a less than favourable position. Although lenders have relaxed their criteria and loosened the purse strings a little since the dark days of a few years ago, it’s still harder for those who work for themselves to get a mortgage approval than those in full time employment.
A healthy deposit or a small equity in an existing property will help, and a squeaky clean credit record will boost your chances too. But what else can you do?
The Dos and Don’ts
When you’re trying to get a mortgage, make sure you don’t fall into any traps.
Do hire a certified or chartered accountant to prepare your tax return and accounts.
Do speak to a mortgage broker about your options. They may offer you alternatives such as a rent to buy scheme or if you’re a first time buyer, be able to recommend help to buy developers or projects in your area.
Do keep up to date records and accounts of your earnings and incomings. This will ensure you don’t create any complications and will help prove your annual income.
Do speak to your current lender if you’re looking to re-mortgage your house or looking to move home.
Do keep tabs on your spending. Lenders assess how well you can afford a mortgage by looking at all of your regular outgoings. This includes food bills, telephone bills, school costs and maintenance payments.
Don’t minimise your income too much for tax purposes, as this will affect your chances in the long run.
Don’t assume it’s impossible! There’s always a way to buy a home.
Rent to buy scheme is an appealing option for self-employed workers. With this scheme, you can rent a home at a fixed price for a certain number of years and then have the option to buy the home at the end of the rental contract.
These schemes are ideal for self-employed workers, particularly those who have just made the leap from the traditional job market, as there is no pressure to raise a huge deposit.
The fixed rent also makes it easier for those who work for themselves to budget and decide whether the cost of owning a house is affordable or not. There is also no worry of paying ‘dead rent’ on a property.
sMighty Home rent to buy schemes can be tailored to suit individual circumstances.
For more information and to find out if a rent to buy scheme is for you, contact Smighty Home
Are you self-employed? What is your experience getting a mortgage? Let us know on our social media!