Personal Mortgages for the Self-employed
Practical first steps for self-employed individuals and business owners looking to get a mortgage
Get off to a good start
Whether you operate as a limited company or sole trader, the principle is the same. Good financial management will help you in the long run.
Separate personal and business expenses as early on as possible, if not from day one.
Implement efficient and accurate systems for recording income and expenditure. If in doubt, seek advice and where possible training, to gain more knowledge on how to go about this. There are numerous online courses in bookkeeping and accountancy that you can access free of charge enabling you to learn at your own pace.
In addition, using a good accountant will help to get things organised, giving you access to invaluable support with ensuring you pay the correct amount of tax on time. Shedding light on any savings you can make, and assisting to provide clarity further down the line when it matters the most.
Proving your income
If you complete your self – assessment online, HMRC form SA302, demonstrates the income you have received and taxes due, in such this needs to be filed accordingly and kept in a safe place until required.
In some instances, when operating as a limited company, directors may opt to pay themselves a lower salary taking a dividend at the end of the year. Whilst this may have some appeal with relation to making tax savings, it can also make it seem as though you are on a lower income and thus distort the bigger picture when attempting to demonstrate affordability.
Again, this is where an accountant can come in handy, as they will be able to prepare your financial statements to address this.
Regardless of your employment status, getting a mortgage has its difficulties. Borrowers have to be in the position to demonstrate that they can afford to make repayments, based on their annual income.
If you are self-employed lenders will want to see at least two years proof of income, mainly through bank statements and payslips.
Lenders will also take comfort from knowing about any future work you have lined up and that workflow is consistent. Emails, contracts and any other documentation you have to demonstrate this will prove beneficial in the long run.
You will need to have a sound credit rating, however, if this something that you have struggled with in the past, it’s best to seek financial advice on how to repair any adverse history there may be, in order to improve your chances of getting a mortgage.
Then there is the deposit, ideally, a forty per cent deposit will place you in a good position to get a mortgage. However having said that, many lenders will accept between ten and twenty per cent, with twenty per cent being the ‘sweet spot’ in today’s climate.
Help and advice
Before taking the plunge and applying for a mortgage without researching the best possible products in the market place, it is a good idea to get professional advice. This will not only assist you in understanding who is offering the best deal but can also prove vital in ensuring you are fully prepared for doing so.
At Newable Finance, we have a proven track – record in helping business owners to get a mortgage. We will take the time to get to know you, your business and mortgage requirements. Through researching the market, we will help you to identify the most suitable options available to you and take the time to assist with preparing you to make an application. We will also take a ‘hands-on’ approach to ensuring that any queries you may have are answered in a timely manner, and provide ongoing support as you make the transition into home-ownership.
For further information or to book a consultation call us on 01737 652 122.