The best mortgages for self-employed workers aren’t always evident on the High Street. In-branch advisors tend to ask for voluminous, often irrelevant paperwork. The figures they then use to work out how much you can afford don’t stack up.
In life, it’s not what but who you know that counts. That truism is also apt for getting a self-employed mortgage…
Table of Contents
- Self-employed mortgage finance: get the right advice;
- Understanding the risk;
- Go for broker;
- Defining the roles of self-employed workers;
- Enterprising mortgages for an enterprising workforce.
Self-Employed Mortgage Finance: Get the Right Advice
Self-employed people can secure mortgage finance, and at competitive interest rates. In fact, beyond a lender’s initial appraisal, mortgages work the same for most people.
But it’s that initial assessment of your status that can make the difference!
So often, untrained advisors get your available income wrong. They see you as ‘self employed’ and tar you with the same brush as everyone else who works for themselves.
You and I know the difference between a company director and a sole trader. We know that a freelancer is unlikely to be a partner in their business. And an IT contractor would have to be nuts to work through an umbrella company.
Yet many mortgage lenders stuff all these trades into one creaking pigeonhole:
Typical professions for self-employed mortgages
Understanding the Risk
Sometimes, lenders have room to accommodate all applicants. But when too many apply, risk comes into play. I’m not talking about credit scores or credit history, but they do come into play.
I’ll make no bones about it. Since the credit crunch, lenders are more aware of the risk balance of their loan book. And 9 times out of 10, a lender will see an employee as lower risk than someone who works for themselves.
So, yes; you could get a self-employed mortgage on the High Street…
…but could you do better for yourself?
Do the long hours you devote to your business warrant at least as competitive a rate as an employee?
The simple answer is “Yes!” But it’s the who (not the how) that will help you make the breakthrough.
Go for Broker
A broker who specialises in self-employed mortgages can give you a head start. Traditional lenders can, in contrast, undermine your mortgage affordability.
They don’t act as a barrier on purpose. It’s just that generic lenders have a one-size-fits-all approach across the board.
To put the difference in perspective, I can say it no better than George Orwell:
All animals are equal, but some animals are more equal than others.
A self-employed mortgage broker can help you tame that animal!
They know that your SA302 may not divulge your true affordability. They also know how to make amenable lenders see what you can afford, too.
Here’s how a broker can secure the best mortgage rate for you!
Defining the Roles of Self-Employed Entities
Tuned in mortgage lenders adapt their loans to five key types of self-employed person:
IT Contractors are amongst the least-risk borrowers in the self-employed community. Clients prize their skills. Demand outweighs supply in the digital marketplace. This combination puts their hourly rates amongst the highest bracket in the country.
The problem IT contractors face on the High St is their payment structure. Most work through a limited company and hire accountants to optimise tax relief.
When a lender tries to fit post-tax accounts into their generic equation, it fails. We deal direct with underwriters who can see beyond post tax accounts. They’ll use a contractor’s gross contract rate to work out affordability instead. No payslips or accounts: contract-based underwriting alone!
At first, banks only accepted IT contractors for contract-based applications. Even today, many lenders still offer those working in IT preferential terms.
But many contractor-friendly lenders have opened up their criteria. Contractors from any walk of life can now get a mortgage based on their contract rate.
A specialist broker will help you find the best lender for your status. We’ve been doing this for a decade and know that no two contractor businesses are alike. Our experience and your contract can get you the mortgage your hourly rate deserves!
As a sole trader or a partner, you know how difficult it can be to get a mortgage. Three-years’ accounts in blood and triplicate SA302 forms, amongst others.
You’ve felt High St lenders’ overbearing bias towards permanent employees. Now, you want someone to treat you with the respect that your hard work deserves.
We know that your income can fluctuate. We know that you document your receipts and outgoings to the letter. And that you depend on an accountant to claim everything available to you.
We deal with lenders who, in certain cases, will ask for only one years’ accounts. We understand how to get a sole trader a competitive mortgage. Let the time we’ve invested up front get you the respect you deserve.
Freelancers can feel the full force of generic lenders’ permanent employee bias. Whether you’re a sole trader or use a limited company, they undervalue your potential.
As you don’t have a fixed income, you are high risk in their estimation. We know that nothing could be further from the truth.
The UK economy has shifted. Larger businesses need specific skills, but for a short duration or singular task. As such, many tens of thousands of self-employed workers use freelance business models.
Advisors in High Street branches may not have moved with the shift in the labour force. But the underwriters with whom we deal have. Your application is safe in our experienced hands.
Most limited company directors draw a low salary and restrict dividends. That plan works great for reducing your tax bill. But it does little to support a generic mortgage application.
That’s where we step in. We’ve developed unparalleled relationships with underwriters over more than a decade. We offer you the leverage of our experience and ible underwriting terms.
Enterprising Mortgages for an Enterprising Workforce
When you look for a mortgage, your first instinct is to turn to a lender your trust. In most instances, that will be where you hold your personal or business bank account.
In an ideal world, that logic would follow through. But in a world where the FCA watches lenders like a hawk, Mr Spock seems to be on vacation.
Don’t let naive advisors put you off applying for a mortgage as a self-employed worker. Your income is as good as any employee’s.
Making lenders see that you can afford your mortgage loan is what counts. And we’re the enterprising team that can help you live long and prosper in an illogical world.