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Getting a self-employed mortgage should not feel like a Herculean task.
Too often, it takes brokers and self-employed borrowers a lot of effort and energy to get a mortgage. The self-employed often find themselves in a counter-intuitive place when it comes to getting a mortgage...
Too often, it takes brokers and self-employed borrowers a lot of effort and energy to get a mortgage. The self-employed often find themselves in a counter-intuitive place when it comes to getting a mortgage.
Recent figures from the Office of National Statistics revealed that there are 154,000 more self-employed people than this time last year. In total, there are now around 4.4 million self-employed people working in the UK – a figure that includes a significant number of women (an additional 93,000 ) choosing to work for themselves compared to the same time last year.[1]
What’s more is that almost half of all self-employed working people (48%) in the UK are aged 50 and over, according to ONS data analysed by the over-50s digital community, Rest Less [2].The proportion of over 50s becoming self-employed has grown year on year for the last decade, despite the Covid-19 pandemic. When we know that complexity is a growing theme of lending generally (multiple income sources are common in many groups of borrowers these days), then the self-employed should enjoy the mortgage lending options available to many other too.
It's this level of complexity that has historically meant the market has been under-served. The experience of many self-employed people has been one of rejection- not always for good reason – leaving many with the impression that they cannot get a mortgage. And of course, they tell their self-employed friends and the perception spirals.
In theory, self-employed clients are managed through the borrowing process via lenders’ underwriting criteria which means that they should have access to the same range of mortgages as everybody else. Those criteria are the devil in the detail. In order to qualify for a mortgage, self-employed borrowers will need to exhibit several proof points which can differ from lender to lender.
We cannot speak for everyone but for self-employed borrowers we will accept the latest 2 years accounts or SA302 and tax year overview depending on self-employment type. Where the trading period is less than 2 years we can consider 1 year’s accounts. For limited companies, last year’s net profit after tax is considered where the borrower owns 100% of the company (though the last 2 years’ accounts will be required to show stable or improving business profile). We can also accept self-employed contractors or those under an umbrella company structure and accept Day 1 contractors with a minimum of 1 year’s track record within the same line of work.
There are many other elements a lender such as ourselves will also consider. For example we will consider workers in construction receiving variable payments including CIS as well as those who have zero hours contract with a good track record, second jobs and variable income. We will help recent freelancers with a track record in a similar role.
Good communication between lenders and the brokers is essential in getting the right decision swiftly. Getting a mortgage as a self-employed person shouldn’t take a Herculean effort from either the borrower or the broker. It needs understanding and an appreciation of what is really going on in their business. We might not be able to make it a walk in the park but neither should it be like climbing Everest..
[2] https://restless.co.uk/press/nearly-one-in-two-48-self-employed-people-in-the-uk-are-aged-over-50/