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In 2001, the number of people in the UK identified by the Office of National Statistics as self-employed was 3.3 million; by 2017, this number had risen to 4.8 million, increasing the self-employed share of the working population from 12% to 15.1%. Despite making up such a sizeable slice of the population, the affordability criteria demanded of self-employed individuals seeking a mortgage are far more stringent than those required of individuals with a standard income profile. This means that a large portion of the working population are being unfairly excluded from the mortgage market, despite being perfectly equipped to meet the financial demands posed by such loans. This need not necessarily be the case.
While most mainstream lenders are notoriously unaccommodating to self-employed borrowers, certain specialist lenders continue to show a surprising degree of flexibility in such cases. Oftentimes, therefore, the only obstacle standing between self-employed mortgage-seekers and a mortgage is a lack of knowledge. By contacting an industry expert familiar with the various affordability criteria demanded by each of these specialist lenders, self-employed mortgage seekers may find themselves eligible for a variety of competitive mortgage products for which they had previously assumed themselves unqualified.
Consider the case of one of Private Finance’s recent self-employed clients. They were looking for a mortgage of £286,000 with a loan-to-value of 85% in order to fund the purchase of their first family home. Prior to contacting us, they had been unable to acquire a loan because they failed to meet the affordability criteria of the mainstream lenders. Their wholesale fashion business had been running for two years at the time of their application, meaning that they were technically able to satisfy the requirement that self-employed mortgage seekers provide two years’ worth of accounts; but due to large start-up costs, the company had only managed to break even over the course of the first year. During the second year, however, the business began bearing fruit, providing our client with a profit that, were their income profile of a more traditional kind, would have been easily sufficient to secure them a mortgage. After locating lenders who were willing to entertain the specifics of our client’s case and explaining the conditions surrounding the first year of their accounts, our expert advisors were able to secure a 2-year fixed mortgage at an interest rate of 1.85% based solely on our client’s most recent years’ worth of accounts.
Last week Pepper Money announced that it completed 87% more self-employed mortgages in 2018 than it had in 2017. And this trend appears to be continuing into 2019, with 26% more self-employed completions in January of this year than in January of last. Examples like this abound. Most high-street lenders remain doggedly inflexible, while specialist lenders adapt their products and policies to take advantage of the ever-growing self-employed sector. Mortgages for self-employed individuals may be a little harder to come by than those catered to individuals with standard income profiles, but with the help of a competent financial advisor, there’s no reason that self-employed mortgage seekers should be unfairly penalised.
If you are self-employed and wish to discuss the mortgage options open to you, you can get in touch by emailing us at firstname.lastname@example.org or by calling 02073172820. Alternatively, you can complete the form at the top-right of this page, and we’ll get in touch with you promptly.