According to data released by the Office for National Statistics, there are now more people who are self-employed in the UK than at any other point during the last 40 years. Self-employment has many benefits, but can cause problems if you want to secure a mortgage for a home.
Lenders expect a borrower to have a secure income, which has roughly the same amount being paid into the bank each month. However, being self-employed doesn’t always guarantee a regular income, which can make lenders wary, especially following the introduction of affordability rules. It is no longer possible to apply for a mortgage using the self-certification method, but there are ways to improve your chances of obtaining a mortgage.
As a lender expects to see proof of income for the last three years, it would be preferable if you had your annual accounts prepared and submitted by a chartered accountant. You will also need a form which is used to declare your annual income to HMRC, a SA302 form. Although you may be tempted to minimise your income for tax purposes, remember that this could affect the amount of money you can borrow for a home.
Reduce your spending during the 12 months before you apply for a mortgage. In addition to improving your affordability, you will also be able to save a larger deposit. If you are self-employed, it is possible to secure a mortgage, but you may want to seek advice from a CeMAP qualified mortgage adviser.
