Each property or homebuyer will have their own unique set of circumstances when they apply for a mortgage. That’s why there are so many different mortgage products on the market.
Sometimes, those circumstances require a more specialist type of mortgage or lender. Sometimes, it’s about doing all you can to satisfy a lender’s qualifying criteria so you can apply for the same type of mortgage deal that the majority of others can.
Mortgages for self-employed individuals
If you’re self-employed, it’s worth noting that ‘self-employed mortgages’ don’t exist. You’ll have the same options available to you that everyone else does – subject to satisfying the mortgage lender’s criteria.
Typically, a lender will require a minimum of two years-worth of accounts that are signed off by a chartered or certified accountant. If you have more records you can submit, even better. The longer you’re seen to have been increasing profit, the healthier your mortgage application will be. To assess your risk profile, lenders take your average profits over time into consideration.
Should your income have varied significantly each year, you may need to submit additional evidence of your future income, such as new clients or secured business, or details of healthy savings accounts.
Lenders will typically ask self-employed mortgage applicants for a deposit that’s a minimum of 10% of the property’s value. Therefore, you may not be eligible to apply for a 95% mortgage.
As long as you meet the lender’s criteria, it’s likely you’ll be able to borrow up to four and half times your household’s annual income, although this varies by lender.
Mortgages for contractors
If you are a contractor, any mortgage application you make will work in much the same way as it does for those who are self-employed.
You’ll need to provide evidence of long-term financial security for lenders, as that’s what they’re looking for.
With this in mind, if you can obtain details of an ongoing agreement with an employer or show contracts that are highly likely to be renewed, this will strengthen your application.
Prior to making an application, avoid taking time off between contracts as much as you can. You need to be able to report a steady income. Lenders may be cautious if you’re seen to have more than eight weeks off in a year.
