We were planning to focus on a review of the budget last week and an assessment of items affecting the housing market – but property was given an extremely wide berth.
However the thousands of self employed people in this country have taken centre stage with changes to National Insurance – and today’s news that there will be no immediate changes.
So this week we take a look at how easy it can be for self employed people to secure a mortgage.
The UK has more self employed workers than ever – and the number wishing to buy new-build homes is also on the increase, according to leading housebuilder Barratt Homes.
Latest figures from the ONS reveal there are now more than 4.8 million self-employed people in the UK and it is fact easier to secure a mortgage than many self-employed people think.
There is currently plenty of opportunity for those with non standard earnings to buy their own property.
In recent years, lenders have been more than a little sceptical about taking the plunge by offering mortgages to those with finances that might fluctuate from year to year – or even month to month.
However there are plenty of mortgage lenders offering finance and as long as buyers can prove their earnings they should have access to the same range of mortgages as any other buyer.
Online tax returns have made it easier for self employed people to provide their SA302 forms which provide the required evidence of earnings for the last three years.
Every application is considered individually on its own merits, and many lenders view new-build homes as a safer bet because of extra safeguards on offer.
And here are Barratt’s top tips to help you secure a mortgage.
What kind of employee are you?
Mortgage lenders may classify you as self employed if you own more than around 20 to 25 percent of a business – even if you consider yourself to be employed. Are you a sole trader, a partner or a director of a limited company? Make sure you are fully aware of your status before applying.
Keep track of your accounts
Most lenders require two or three years’ worth of your business accounts. You need to keep them up-to-date because many won’t accept them if the most recent are more than 18 months old. Try to use a certified or chartered accountant. Some lenders will accept as few as one year’s accounts if you have substantial savings and a good credit record.
Be good to your creditors
Your accounts will contribute towards part of the decision. Your credit record is also crucially important. You need to prove that you’re worth the risk – and if you have had a loan in the past, an excellent history of repaying loans is a great start.
How much can you afford?
Borrowing more than you can reasonably afford is far more difficult to do for any type of buyer these days. However, it might still be an idea to factor in the possibility of a downturn in your business fortunes – just in case.
We don’t recommend making last minute changes to your self employed status – for example, from sole trader to limited company – prior to applying for a mortgage. It may cause confusion and prompt a delay in approving your application.
Save if you can
It never hurts to have a sizeable deposit saved and ready to use – particularly if you have less than two years’ accounts to offer. If this is not possible, all is not lost. You may still be eligible to make use of Government-funded schemes – like Help to Buy – allowing as little as five percent deposit on new build homes up to £600,000 in England.
Seek out advice
There are many types of mortgages available to self employed buyers – some from specialist lenders and some from mainstream high street companies. It is important to take expert advice before making your choice. Barratt will provide access to this through its network of approved new homes mortgage advisers and support you throughout the entire process.
The New Homes Group