Self-employed offered mortgage tips

Tuesday 1 December 2015

There are many financial considerations that come with making the move into self-employment, from ensuring that you are paying the right amount of tax to claiming all the expenses to which you're entitled.

Another issue - which some people might not see as a priority but others will be heavily affected by - is the impact being self-employed can have on your chances of getting a mortgage.

Earlier this year, the Association of Independent Professionals and the Self Employed (IPSE) released a survey showing that nearly two in five people working for themselves (38 per cent) who are interested in getting a mortgage are concerned they will never get one.

The research revealed that nearly two-thirds (63 per cent) of microbusiness owners believe the self-employed have to "jump through more hoops" than traditional workers to get a home loan.

Six out of ten independent professionals (61 per cent) felt mortgage advisers didn't understand their financial situation and 45 per cent thought lenders didn't want them as customers.

In an article published in the Guardian, Chris Bryce, chief executive of IPSE, offered a number of tips on how the self-employed can improve their chances of securing a mortgage.

He referred to comments made by Andrew Montlake, director at mortgage broker Coreco, who pointed out that there is no "one-size-fits-all" approach to mortgage applications for the self-employed.

While things are "improving slowly", many would-be borrowers who work for themselves often receive the same response from lenders.

"Either you tick all of their endless boxes or they're not interested," said Mr Montlake. "What's more, many frontline staff just don't know how to interpret a set of accounts.

"The good news is that there are lenders who do understand how a self-employed person works, but even then there are a myriad of different interpretations."

Freelancers and contractors eager to get on the property ladder can do several things to improve their chances of making a successful mortgage application, starting with basic steps such as paying off other debts and building a strong credit rating.

Limited company owners can show their financial responsibility by paying bills on time and staying within their credit limits.

Another obvious but important step is to save up as large a deposit as possible. Being able to cover a significant amount of the cost of a property upfront will boost your chances of being accepted for a mortgage and also secure you a better interest rate.

Mr Bryce also recommended asking whether you, as a self-employed person, need to be the lead applicant for the mortgage.

If you have a partner who is in full-time employment and can prove a higher regular income, it could prove beneficial to make the application in their name.

Another wise move is to use an independent, specialist mortgage broker who has experience in securing good deals for the self-employed.

A broker who knows what they are doing in this regard will be able to tell you which lenders are the most likely to approve your application and where you might be able to get the lowest interest rates.

By Victoria McDonnell

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