One of the myths of the mortgage market is that a self-employed person will find it very difficult, if not impossible, to borrow money to buy their own home. The myth is that only employment makes finding a mortgage deal possible. The truth is that, while some self-employed people may find it tough, there are a range of self-employed mortgage options and being self-employed should not be a barrier to securing home finance.
History of Self-Employed Mortgages
In the past the mortgage for the self-employed person was the self-certification mortgage. This product is no longer available, however, because it was not properly used by lenders or borrowers. It was designed for a small portion of the self-employed population but was misold and used too widely. Other options are available today.
Options for Self-Employed Borrowers
Self-employed borrowers should have access to the same mortgage deals as other people. But to get the best mortgage deals you need to prove that your income is sufficient to meet the repayments. If you, as a self-employed person, can do this then you can access the same loans as everyone else whose income allows them to meet the financial requirements of the loan. Mainstream lenders routinely offer their deals to the self-employed, so you may not need a specialist adviser and you can pick up variable and fixed rate deals.
Eligibility for Self-Employed Mortgages
In most cases you will need to have two years of company accounts or tax returns to demonstrate that your income is at a sufficient level. You may also need to show that you have work lined up for the future in order to show that you can sustain your level of income. If you do not have two years worth of accounts you could still get a loan through a regular track record of contract work, for example. You can also get a deal if you are remortgaging and have a good track record of making payments on time.
Offsetting your mortgage against savings can be a good option for the self-employed as the money you set aside for paying your tax bill can be counted as savings to be used to reduce the amount of interest you pay on the mortgage. This can add up to a considerable amount if you are running a business that pulls in a good income. An offset mortgage is designed to save you money on interest charges by using savings to count against your borrowing. An offset mortgage can also be used by members of the family to help out self-employed relatives.
It is important to seek professional advice if you are a self-employed person looking for a mortgage. It can be difficult to prove income when accountants are paid to try to bring your taxable income down. Getting impartial advice, says flagstone.co.uk, is crucial for getting the best deal and ensuring your mortgage is affordable and suitable for your needs.