The self-employed may well have felt hard done by in recentyears – one repercussion of the credit crunch is that mortgages for this sector are now far harder to come by. For those with three years or more of accounts, some choice is available, but someone newer to being their own boss may find too many doors
The regulator, the Financial Services Authority, has clamped down hard on the self-certification mortgage market, which was a primary means to obtain a mortgage if someone was self-employed in the past. It has been estimated that during the housing boom around 45% of all mortgages offered were on a non-income-verified basis, according to the FSA’s Mortgage Market Review in 2009.
Unfortunately, the fact that some borrowers over-estimated their earnings resulted in problems with lack of affordability. While this was not the case across the market, a sharp retreat took place and thus freelancers and others running micro businesses may have felt that renting was their only option.
But, nobody’s job is certain and some who are self-employed and work for a number of companies are confident that their work can be even more stable than for those who are permanently on a payroll. There are also plenty of contractors, for example, who took such roles and opted for self-employment because their services are very much in demand and they continue to be highly paid.
At long last, though, it seems that the stringent conditions being imposed by most lenders are finally easing. A number of building societies, particularly smaller ones, are starting to market mortgages for the self-employed that only require
12 months’ accounts. The fact they are taking a more helpful stance is encouraging for mortgage advisers who have seen their customers frustrated by the lending policies of some major banks.
While choice remains limited, an adviser may have access to lenders who will offer mortgages provided there is a deposit of 20 per cent – ideally more – a clean credit history and proof of income over a 12-month trading period, such as accounts or
SA302 self assessment tax returns. This will typically be aimed at those who are registered as limited companies, while those who run the business as a sole trader can show the lender proof of net profit.
It is not a perfect picture, but the general situation for everyone, whether they are self-employed or not, is starting to look less problematical. Whatever your circumstances, an expert mortgage adviser aims to find providers who may be willing to lend.