Mortgage lenders are adopting stricter criteria for those that are looking for a self-employed mortgage, thanks to the pandemic. Lenders are tightening the purse strings on the amount that they will let self-employed workers borrow. A third of self-employed renters don’t believe they’ll ever be able to buy their own home, according to research from Aldermore Bank. So, we thought that we’d explain the challenges that self-employed borrowers face; and offer some advice on how to boost your chances of getting a home loan.
Has it become harder to get a self-employed mortgage?
Getting a mortgage as a self-employed worker has always been more complicated. However, the pandemic has added greater uncertainty; with banks reluctant to take on what they perceive to be ‘riskier’ lending. Many lenders are adopting stricter criteria than before, which is why having a mortgage broker is so handy when looking to purchase a property. As a mortgage broker we are experienced in searching the whole of the market for the right self-employed mortgage for you; as well as double checking that you will meet their criteria prior to submitting any applications.
Will things get better for self-employed borrowers?
Whilst we wish that we had a crystal ball and could say that everything will be on the up for those looking for a self-employed mortgage; we can’t promise that. However, there are some glimmers of hope!
Santander requires bigger deposits than before, but it has taken the lead in allowing applicants to disregard their accounts from the 2020/21 tax year. Natwest, meanwhile, has announced it will launch new self-employed criteria in the coming weeks. The situation is ever-changing at the moment, resulting in wildly differing criteria and a risk-averse approach from lenders; but if the economy recovers well from the pandemic, banks may begin to loosen the purse strings. In the meantime, self-employed applicants may have greater luck considering building societies and specialist lenders; who may assess applications on a case-by-case basis rather than using blanket eligibility criteria.
5 tips on getting a self-employed mortgage
- Take advice from a mortgage broker. Whether you’re buying a home or remortgaging, professional advice is vital in being able to navigate the mortgage market. As a mortgage broker we will be able to assess your financial circumstances and analyse which lender will be most likely to offer you a deal. This can save time and prevent failed applications, which can have an adverse effect on your credit report.
- Use an accountant. Banks are asking for more evidence than before, so it’s important that your numbers add up correctly. Some lenders will only accept applications if your accounts are signed off by a certified or chartered accountant.
- Get your paperwork in order. Lenders will usually require three years of accounts. Accountants will usually provide your annual tax calculation (the SA302 form) as evidence. If you file your taxes online, you can access this form by logging into your account. If you file by post, you’ll need to contact HMRC. Make sure you have these documents before applying.
- Ensure your credit report is up to the mark. Before applying for a mortgage, ensure everything is correct on your credit report. For example, are you on the electoral roll at your current address? There are lots of steps you can take to boost your credit file, including paying off outstanding debts and closing dormant accounts. Be careful about your spending habits in the year before applying for a mortgage, as lenders are more likely to take this into account.
- Save a bigger deposit if you can. It’s a difficult market, and the bigger your deposit, the easier you’ll find it to get a mortgage.
If you’re looking to get on the property ladder or need some advice about self-employed mortgages please get in contact with our experienced team on 01634 968111 who are more than happy to help!
Lender data mentioned within this article is correct as of 1st August 2021 and maybe subject to change.
