Securing a mortgage when you are self-employed

March 16, 2016 by Brendan O'Neill

Advice & Tips

If you are self-employed, you may find it harder to obtain a mortgage with a reasonable interest rate and Loan To Value. Many lenders have their own set of criteria which you must fulfil to be able to borrow from them. Some lenders may take the deposit into account, especially if it is a substantial amount, whereas others may be especially harsh and demand three years of accounts and offer a higher interest rate.

In the past, self-certification mortgages were available, which required minimal proof of income so that self-employed people could obtain a mortgage relatively easily. However, now that there are affordability checks which have to be carried out, securing an affordable mortgage can be complex.

The Mortgage https://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpget Review was introduced to make sure that borrowers didn’t borrow more than they could afford. Proof of income will be required by a lender, which may be difficult to obtain if a person is self-employed and doesn’t have a regular income.

A lender may require three years of accounts and will probably take the average annual salary over that time. Although it may be tempting to use legitimate methods to reduce gross income and pay less tax, this may be a disadvantage as the amount you can borrow will be calculated using your annual income figure.

As it can be difficult to secure a mortgage if you are self-employed, it is advisable to seek advice from a mortgage adviser who has taken CeMAP training.