Mortgages for the Self Employed: 5 Tips to Help You Find the Best Mortgage Deal
Self-employed people have always found it harder to get a mortgage than employed people - even if they have long-established, stable businesses, like plumbers and electricians.
That situation has improved in the last few years - but the credit crisis that started in July 2007 reversed much of this progress and has left self-employed and self-certified borrowers competing for a much smaller pool of mortgages.
The good news is that mortgages for the self employed are still out there and are available to good-quality, self-employed borrowers. The trick is to make yourself as attractive as possible to potential lenders…
How to Improve Your Chances
I’ve put together five tips that are guaranteed to help you get the best self-employed mortgage deal for your needs.
They aren’t difficult and shouldn’t cost you much in time or money - but they should help you to save on your monthly mortgage payments.
1. Get Your Finances into Shape
If you were selling a car, you’d wash and tidy it before putting it on sale so that it looked its best.
Applying for a mortgage is no different. Make sure you pay off or reduce any other debts if you possibly can. Gather together documentary evidence of any mortgages you have had in the past. Annual mortgage statements are ideal for this.
If you contribute regularly to a pension or have savings, make sure you have evidence of these, too. This all helps to create a picture of a creditworthy, reliable borrower - someone who deserves the best rates of interest.
2. Provide Proof of Income
Not all self-employed people can provide proof of income, but if you can, you have an automatic advantage as you can apply for ’status’ mortgages - mortgages based on proof of your income.
Proving your income when self employed normally requires three years’ certified accounts for your business - your accountant will do this for you. If you don’t have the necessary trading history but do have a provable income, ask your accountant for a letter of confirmation instead.
3. Put Down the Biggest Deposit Possible
The bigger your deposit, the better the rate of interest you will be eligible for.
This is because mortgage lenders believe that the more you are contributing yourself, the lower the risk that you will default on your mortgage payments.
Ideally, you want to aim for at least a 10% deposit - and more if you can afford it.
4. Honesty is the Best Policy
Be honest about everything when you apply for a mortgage.
This doesn’t just go for income. You should own up to any credit problems you have had in the past, as they will be uncovered when you are credit checked. Refusals can cause problems in the future and borrowing above your means makes you much more likely to end up falling into arrears with your mortgage.
5. Do Your Homework - Avoid Being Refused
It’s important not to apply for mortgages if you don’t have a realistic chance of being accepted. Refusals are put on your file at credit reference agencies and will show up when you apply for credit in the future. Too many refusals make you look desperate - and that can put lenders off.
This is why using the services of a mortgage broker can be a very good idea if you are looking for a self-employed mortgage - still a relatively specialist area of the market. You won’t find many lenders on the high street and a broker will be able to match you up with the best possible mortgage for your circumstances. This will minimise your chances of being refused.
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