Self-employed mortgages

Mortgages are getting easier for the self-employed, and if you have dealt with a good broker you shouldn't be getting turned away. The difficulty with being self-employed is the unregularity of your income, but if you have had a steady income for the past 12-24 months without assistance it is no more difficult to get a mortgage than if you were an employed person. Many lenders are much more friendly to self-employment.

Self-employed mortgages have become easier to obtain since the economy has opened up again. The main hurdle for a self-employed borrower is having enough provable earnings and/or trading history. Many directors retain profits in the company to minimise their tax bill which unfortunately can also minimise how much they can borrow with those lenders who only work off salary and dividends. Fortunately, there are plenty of lenders who'll consider salary and net profit. For affordability calculations, many lenders will average a director's past 2 year's salary and dividends or salary/net profit. But some will consider just the latest year's figures, which can help enormously if your business is just starting to recover from the pandemic. One or two providers will even ignore a lousy trading year if it was obviously caused by the lockdowns.

In terms of have mortgages for the self-employed got easier than just after the pandemic, the simple answer is 'yes'; many lenders have reverted back to their pre-COVID criteria when it comes to the self-employed, so other than maybe having to add a few extra notes to explain things on specific cases, it's back to business as usual in the main. The main reason self-employed applicants get rejected more often than employed applicants is because, quite simply, they are talking to the wrong bank. Many people default to going to "their bank" when it comes to getting a mortgage, but just because you've had your current account and probably business account with them for years, in no way impacts on whether they'll give you a mortgage. Many of the best lenders for the self-employed aren't actually High Street banks, so just popping into your local branch is pot-luck in terms of getting a mortgage when self-employed. Even if you do get a mortgage agreed it's quite possible another lenders would have agreed a larger loan, or a better interest rate. To give yourself the very best chance of getting a mortgage approval, on the best terms for your situation, then speaking to a professional mortgage broker is the only way to go.

The age old issue is that self employed clients often pay their accountants to make them earn as little on paper as possible to minimise their tax bill which is all well and good until they need an income stretch on a mortgage. Jokes aside, even a straight forward case can be somewhat of a lottery with lenders. Brokers collect their documents and proofs of incomes and submit a case totally in line with published policy. The problem arises when you get into the grey area of an underwriters judgment call on the health of the business which is a bit harsh. Take businesses who took a covid grant as an example. It's very harsh to penalise a business owner that did this when they couldn't give two hoots on someone who may have spent lockdown twiddling their thumbs on furlough. It strikes me as very unfair. Yet many lenders won't use this income and still insist on taking average figures excluding any support.