How to get a mortgage if you are self-employed
At various times in our working life, we may all have a desire to do something for ourselves and step into the world of business ownership. However, it is only a very small percentage of people that take the plunge and become self-employed. Those that do take the required steps benefit from total independence, a true love for what they do, flexibility in working hours and potentially unlimited earnings.
There are a number of excellent benefits of being self-employed. However, the one problem that can arise is with trying to secure a mortgage. Historically securing a mortgage when you are self-employed can be a challenge as lenders are concerned about the lack of evidence when demonstrating income. To help with this process there are several steps that can be taken to put a self-employed professional in a positive position when applying for a new mortgage.
- Preparation
Keep excellent bookkeeping records of income and expenditure, look to use an accounting system which, when populated, can prepare reports of accurate and meaningful data. Always ensure you have a positive credit score and if possible, have a good level of savings.
- Speak to the experts
There are several excellent mortgage advisors that specialise in self-employed mortgages. Seek their professional advice and guidance as they can complete an initial fact find, check on affordability scales and match you to the right lenders.
- Seek financial accounting help
Use a professional accountant to prepare all financial information. A lender will look more favourably on the application if the accounts have been prepared by experts. The credibility of providing accurate information gives a lender lots of confidence.
- Credit history
Try to maintain a positive credit score and if there are any negative connotations then work to address these and allow time before completing the mortgage application. It goes without saying the better your credit score, the better the chances of securing a mortgage.
- Positive cash flow
Try to ensure you have a positive cash flow which demonstrates that any bank accounts have a healthy credit. Where possible also have good levels of personal savings which, should income one month be slow, demonstrates that the repayment of mortgage fees will always be covered.
- Present the right documentation
Copies of trading history (for the previous two years), HMRC documents such as an SA302 and evidence of upcoming contractual agreements will be required when any mortgage applications are made.
Other personal information used for evidence will also be required these can include passport or driving licence, utility bills, council tax bills and bank statements.
Finally, being on the electoral register with the right to vote is also advantageous as a lender can research this and use it as verification for identification purposes and proof of address.
If you have any questions or need some help with any aspect of self-employment and accountancy support then would be happy to help. Please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free call with Yarka – https://calendly.com/yarka-ssa/20min
