Being self employed makes getting a mortgage a little more complex. Where as with employed applicants we usually just need to provide 3 months payslips that is not the case with self employed applicants.
Why is it more difficult to get a Mortgage being self employed?
There are various reasons for that but the big one is how do we evidence income from just bank statements?
You may show 3 months bank statements and that might show say £5k hitting your account each month – 12 (months) x £5k = £60,000 p.a. That is your turnover, but from there you might have expenses. An example here is we have to pay for our our IT systems, we have to pay our office rent etc. Those would then come off the £60,000.
So we could then look at the figure after the monthly costs? But the problem here is that there might then be annual costs that have not been paid yet.
Profit not turnover
Lenders have to ensure that the business is viable. They can only do that after they have one years figures. It would be expected that these would take into account the business income and its annual expenditure.
Mortgage options with one years accounts
When we look at lenders available we typically have 3 levels:
- Specialist lenders. These are the lenders that look at doing things the high street wont touch. They do not credit score, they take more risks but their rates are higher.
- Building societies. Some building societies will sit down and take a manual approach here. There is usually a little more work entailed here. We have to build up a story (not a fictional one), and put across all of the positives, this would usually be things like your experience in the industry, any contracts you have etc. We then sit down and talk it through with an underwriter and all being well we are given permission to proceed.
- “normal” lenders. Unfortunately this is not really all that common. There are maybe 2 lenders who will consider one years accounts. It is not a given and we need to discuss the application with out account managers first.
As you can see from the list above, there are various options where you have one years accounts. But the devil is very much in the detail and will depend on a number of questions such as:
- Do you only have one years accounts or have you had a large increase and want to use the latest years figures only?
- What is your experience in the job/industry?
- Are there other things to consider? Barrier to entry? Competition? contracts signed?
Next Steps
Come and talk to us. We can discuss your circumstances and try to understand your business and where you are. We can then give you an idea of what your potential options will look like.
As always we aim to give you an accurate idea by the end of the first call so as not to waste your time.