- Collect your last three years accounts
If you’ve been self-employed for over three years then you’ll want to get each of the three year’s accounts ready. Accounts can be downloaded online from the official HMRC government website. If you have an accountant, they can also do this on your behalf.
If you don’t quite have three years accounts, then don’t worry. It is possible to get a mortgage in the UK with accounts for just 1 year. If you don’t have accounts for 1 year, then you will struggle to get a conventional mortgage, however there may be other options for you to consider.
- Highlighting future work you’ve secured
If you’ve got future work secured via a contract, then be sure to include this with your application. This gives lenders an insight into any additional and future income that you may earn. Highlighting future work is great for when your declared net profits fall slightly short. By providing details of future work you’ve secured you can potentially increase your affordability and in cases borrow more money.
Having evidence of future work also makes you appear at a lower risk to lenders. Being self-employed can make some lenders wary. Running a business is a risk in itself, so lenders want to see solid foundations. Future contracted work can highlight that the business is around to stay and that making mortgage repayments won’t be an issue.
- Include all your income streams
If you have additional income streams, such as buy to let property or even other businesses, then do include them in your application. The more income you can put forward in your application, the more you can potentially borrow. Remember, the affordability for self-employed applicants is assessed on net profit only and not gross profits. For tax reasons, net profits are usually reduced as much as possible, legally of course.
Employed individuals are assessed on gross income, usually via their payslips and p60. From an affordability perspective, it puts self-employed borrowers in a more disadvantaged position.
- Use a specialist mortgage broker
Using a mortgage broker can be the difference in getting a mortgage and being declined. If you’re self-employed, getting a mortgage can be difficult. This is because self-employed borrowers can be deemed higher risk than employees. This is especially true for when you haven’t been self-employed for at least three years.
High street banks and conventional brokers may decline mortgages where applicants are self-employed. It may be due to affordability from low net profits or not having enough annual accounts. Specialist mortgage brokers are ideal for when your self-employed as they have access to specialist deals and have experience in securing mortgages under difficult circumstances. Even if you’ve only recently started trading and don’t have enough accounts, specialist brokers will inform you of what to do, so that you can eventually secure a mortgage once ready.
Expert Mortgage Advisor is a mortgage information website that specializes in topics such as self-employed and bad credit mortgages. They also have access to specialist brokers that they can put you in touch with.