Self Employed Mortgage Advice in Hull
Self Employed Mortgage Advice
Nowadays, it’s very unlikely for an 18 year old to leave school and work for the same employer all the way through till retirement. There are so many jobs out there for young people to walk into, there has been a massive growth of job opportunity in the engineering and digital sectors which were not there years ago. This has opened up gaps in the market and allowed people to go self employed and create their own business’ across many different markets.
Unfortunately, being self employed and trying to get a mortgage can be hard. This is usually down to the fact that people are running small business and their income is a lower than a regular applicants. Here we are going to give you some advice in ways to improve you chances of securing a mortgage being self employed in Hull:
How many years’ accounts do I need?
At the moment it’s a minimum of one year’s trading with some lenders wanting a minimum of two. The reason for this is that so many businesses fail in the first year. Banks aren’t willing to take on that level of risk.
We advise that you don’t rush into applying for a mortgage during your first year of being self employed. If you get declined, it could leave a negative effect on your credit file which could lower your chances in the near future to get a mortgage.
How is my income assessed?
Most lenders will take the average of your last 2 years’ earnings but some go off the latest year. This could be good news for you if your profits are increasing. The more money that you are making, the more likely it is that you will be accepted.
I’m a director of my own limited company – does this mean I’m employed?
Yes, you are employed but no, the lenders do not assess you as an employee unless you own less than 25% of the shares. Most lenders add your salary to your declared dividend to calculate your annual earnings with the odd one using net profit (this can be good if your business retains some profit).
My net profits don’t reflect the true picture of my business – what can I do?
This is a familiar question but there’s not much that can be done – your mortgage application is assessed on the income declared (net profit or salary/dividend) to the revenue. If you want to get a mortgage then you need to have paid some tax.
How much deposit do I need?
This is the same as an employed applicant, there is always a minimum of 5%. In some cases, they may require more if you only have one year’s accounts.
Will a bigger deposit help me?
You can also pay more if you can afford it, lender’s will love a self employed applicant who can afford more than a 5% deposit. You may also be offered a much better deal the lender is likely to offer you and you will have a wider choice of lenders. In terms of the maximum mortgage that will be made available to you though it doesn’t make a massive difference.
I’m a contractor, do I get treated differently?
Yes, it can be. Lenders do seem to like contractors at the moment and if you’ve built up a good track record then the lenders can consider taking your “daily rate” and applying a multiplier to this rather than your net profit. I have seen lenders offer bigger mortgages to contractor applicants using this method, especially for IT contractors.
Can I self certify my income?
Unfortunately, “self-certs” were widely abused in the pre-credit crunch days and there is no sign of this type of mortgage returning. Taking out a mortgage being self employed can sometimes be much more complicated than it would be for an employee. However, you will realise that some lenders are more flexible than others.
It’s a good idea to get a Self Employed Mortgage Advisor in Hull on your side early on in the process. Therefore, you’ll have realistic aspirations right from the start. Long gone are the days when your local bank manager could “take a view” on your circumstances just because you are a loyal customer.
Lost of lenders have resolved in relying on their computerised credit scoring systems and the arguments are that they are unreliable and unfair. This is not the case for every lender, some will do it the old-fashioned way too and some may even give you a bit of leeway because of your personal circumstances, it down to them.
Are you self employed in Hull?
Are you facing mortgage hurdles of your own and need specialist help from a Self Employed Mortgage Advisor in Hull? No worries, we are here to help! We have been helping the self employed secure mortgages for over 11 years and we can’t wait to try and help you too!