Have you vowed to get on the property ladder in 2017? Getting a mortgage is likely to be the biggest financial commitment you’ll ever make. Unfortunately, however, sometimes this can prove difficult, particularly if you are self-employed.
With the number of people in the UK that are self-employed on the increase, it’s important you know these top tips to help get you on the ladder.
1 Keep your paperwork up to date
Make sure your paperwork is up to date and in order – this means get your tax returns in! You can download your SA302s on the HMRC website. It’s important to remember to bring these with you to your mortgage appointment. Most lenders will need your SA302s or accounts to be less than 18 months old, but, if you can’t provide that, some lenders will consider just one year’s worth of accounts/tax returns.
2 Consider using a professional accountant
Lenders often prefer it if you have used a professional accountant. Whilst you may think this is an extra expense, it can make life a lot easier – especially if you need to explain some anomalies in your finances.
3 Increase your declared income
Unfortunately, to be able to borrow more you need to increase your declared income and this often means paying more tax. If you are self-employed lenders will be looking for the net profit figure and many looking at the average over the past 2-3 years. However, some lenders will look at the average over a shorter term.
4 How’s business?
You generally need to be able to show an improving business situation, unless you have a reasonable explanation. Beware – “reasonable” is subject to the mortgage underwriter’s discretion.
If you are a salaried director of the business, most lenders will consider the average of your salary and dividends over the last two years, however some lenders will consider your share of the net profit and your salary rather than your dividends – this can give you increased borrowing capacity.
6 Be wary of your dividends drawings
Make sure your dividend drawings from your business are not higher than your net profit. A potential lender is likely to view this as unsustainable.
7 Consider your status within the business
If you own less than 20% of the shares in a business most lenders are likely to consider you as “employed” and therefore you might be able to use just one month’s payslip as proof of income.
8 Check your credit rating
Most lenders will use three credit rating agencies; Experian, Equifax and Callcredit. It is in your interest to check all three before you embark on finding a mortgage. It can be useful to bring your credit report(s) to your mortgage appointment.
9 The benefits of using an independent mortgage adviser
Of course, this one is obvious to us! Most self-employed people will benefit from using an independent mortgage adviser. We know which lenders are most suitable for self-employed applicants and your situation. At times, getting a mortgage approved when you are self-employed can be a struggle – we can help by liaising with the lender and your accountants to make the whole process a lot smoother.
10 What to consider once you receive your mortgage
Once you have got a mortgage make sure you can keep making the repayments, whatever might happen in the future. For peace of mind, look into getting protection against sickness, accident and death. It might even be cheaper than you expect and means that you could keep your home in difficult situations.
If you would like further information on applying for a mortgage or insurance please contact Hugh James’s Independent Mortgage Adviser Lisa Russell on firstname.lastname@example.org or call 029 2066 0565. Your home may be repossessed if you do not keep up repayments on your mortgage.