FAQ’s From Self Employed Applicants
How many years on the books do I need?
Typically, self-employment history of at least two years is a common requirement among lenders. The majority of high street lenders prefer to see evidence of this duration when considering mortgage applications. Although some specialised self-employed lenders may assess applications based on a single year of accounts, it’s important to note that most traditional lenders will seek a minimum of two years’ financial records.
How will a Lender assess my income?
High street lenders usually request financial accounts spanning 2 to 3 years. These accounts should provide a detailed breakdown of your income, expenses, and operating costs. This thorough examination helps lenders evaluate your ability to make consistent and timely mortgage repayments. Additionally, some lenders may take into account retained profits within your business as part of their assessment of affordability.
I’m a Director of my own Limited Company, how does the process work for me?
Directors, even within their own businesses, are often considered employees by most lenders. Typically, lenders require that you own less than 25% of the shares in the company to be eligible for assessment. Lenders often incorporate the dividends you’ve drawn into your annual salary when calculating your yearly earnings. The maximum borrowing amount may vary depending on this combined figure. However, some lenders may focus on net profit instead of dividends or salary, which can be advantageous for directors who keep their drawings low.
How much deposit do I need to put down?
Self-employed mortgage applicants usually need to provide a minimum deposit of 5%. However, the exact deposit requirement can vary based on your individual financial circumstances and the lender’s policies.
Can a Self Employed Contractor get a Mortgage?
Contractors often face unique challenges when seeking mortgage options due to the prevalence of short-term contracts. Lenders may consider your “daily rate” as a basis for assessing your income rather than solely relying on net profit figures. Additionally, most high street lenders will inquire about the remaining duration of your current contract to gauge your ability to make mortgage repayments consistently. In some cases, it may be possible to secure a mortgage, even if this is your first contract, depending on your specific circumstances.
Common Self Employed Mortgage Scenarios
Popular Self Employed Scenarios in Scunthorpe
We have had the privilege of helping numerous self-employed individuals in the past, providing them with expert, prompt, and approachable Mortgage Advice in Scunthorpe. Here is a range of common self-employed scenarios that our advisors have encountered over the years while working with applicants like yourself:
- You hold a significant role in a company, whether as an owner, director, sole trader, or business partner, and you are seeking specialised self-employed Mortgage Advice in Scunthorpe.
- The bank has offered you a borrowing amount that falls short of your requirements, and you wish to explore the possibility of securing a larger loan.
- As a self-employed business owner, your income may consist of a combination of salary, dividends, or a directors’ loan.
- You typically retain a substantial portion of your net profit within your company instead of drawing a higher salary for yourself.
- Despite having a strong credit score, you find that you do not meet the stringent lending criteria imposed by banks for various reasons.
- Your net profit shows an irregular pattern.
- Your business has been operational for just one year.
- Your company is currently experiencing a busy period, and you require the expertise of a Mortgage Advisor in Scunthorpe to navigate your mortgage options.
Directly approaching banks may not always be the most suitable path for self-employed applicants. Many banks rely on automated systems, which can lead to unfavourable outcomes regardless of your longstanding relationship with them or your regular financial transactions. Fortunately, engaging a Mortgage Broker in Scunthorpe, such as Scunthorpemoneyman, offers several advantages. Our advisors meticulously assess your unique circumstances and current financial status to identify the most appropriate lender for you. This tailored approach significantly enhances your prospects of achieving your mortgage objectives.
Self Employed Customers & Bank Mortgage Advice
Most major mortgage lenders on the high street have established their own internal credit scoring policies when it comes to determining mortgage eligibility. These credit scoring policies typically draw from the lender’s extensive experience with previous mortgage applicants throughout their history.
In their assessments, they scrutinise past mortgage repayment records, historical data related to repossessions, and other recurring patterns to identify common factors that are considered higher risk. This approach streamlines the lender’s decision-making process, saving them time and resources. However, it often places many self-employed mortgage applicants at a disadvantage.
Historically, one could argue that lenders encountered a notable number of self-employed mortgage applicants who fell into arrears. However, it’s essential to acknowledge that self-employed individuals have consistently faced challenges when applying for mortgages compared to other customers.
If you’ve conducted your own research, you’re likely aware that high street lenders typically impose stringent lending criteria. Many of these lenders require a minimum of three years’ worth of accounts, with some basing their assessments on a three-year profit average.
While this isn’t a universal rule, as some lenders may only demand one year’s worth of accounts, it is advisable to have more than just a single year’s financial history. This broader financial history enhances your range of mortgage options and strengthens your application.
Self Employed Mortgages – Enquire Online
Booking a free mortgage appointment for Self Employed mortgage advice in Scunthorpe is easy. Just complete our ‘Book Online’ form, and you’re one step closer to your mortgage goals.
When dealing with most high street mortgage lenders, it’s important to understand that they rely on their proprietary credit scoring policies when evaluating mortgage applications from customers. These lending policies and scoring systems are formulated based on the lender’s extensive experience within the industry.
Lenders conduct thorough assessments, examining historical mortgage repayment data, repossession records, and other prevalent trends to identify applicants they consider to be higher lending risks. This approach is efficient for lenders as it saves them both time and resources. However, it can often leave self-employed individuals with limited options to achieve their mortgage objectives.
As previously mentioned, the majority of high street lenders maintain stringent lending criteria. Many of them require a minimum of 2/3 years’ worth of accounts, with some calculating an average over three years to assess your eligibility.
While this isn’t an absolute rule for all lenders, we recommend having a few years of financial history to bolster your chances of securing a mortgage.