Popular Self Employed Scenarios
We have worked with many self-employed applicants in the past, who required some expert, fast and friendly Mortgage Advice in Birmingham. Below we listed a selection of popular self-employed scenarios our advisors have faced over the years when speaking to self-employed applicants like yourself:
- You are an owner of a company, a director, a sole trader, or a business partner, requiring expert self-employed Mortgage Advice in Birmingham.
- The bank will only offer you a small amount to borrow, and you want to see if you can borrow more.
- As a self-employed business owner, you are paying yourself a combination of salary, dividends or a directors’ loan.
- You leave most of your net profit sitting in your company instead of paying yourself a larger salary.
- Despite having a great credit score, you don’t match the banks’ strict lending criteria for one reason or another.
- You have an unbalanced net profit.
- The business has only been trading for 1 year.
- Your company is going through a busy period, and you need the assistance of a Mortgage Advisor in Birmingham.
Banks are not always the most suitable options for self-employed applicants to speak to directly. Most banks have automated systems, and unfortunately, no matter how many years you have been banking with them or how much money you pay into your account regularly, you are out of luck if they say no.
Lucky for you, one of the many benefits of using a Mortgage Broker in Birmingham like Birminghammoneyman, we may be able to help. Our advisors can match your circumstances and current financial position to see if we can match you to the most suitable Lender, giving you a better chance of achieving your mortgage goals.
Self Employed Customers & Bank Mortgage Advice
Most high street mortgage lenders you can speak to will use their in-house credit scoring policies when assessing their customer’s mortgage applications. These lending policies and scoring systems are based on the mortgage lenders’ own experience working in the industry.
Lenders will analyse previous mortgage repayment statistics, repossession information and other common patterns to determine whom they believe would be risky to lend to—saving them both time and money. However, it can leave a lot of self-employed applicants without a way to achieve their mortgage goals.
As we said, you will find that the vast majority of high street lenders out there have stringent criteria, and many want to see your profits increasing over a minimum of 2/3 years accounts, with some taking an average over three years.
Whilst this doesn’t apply to every Lender, we recommend it’s always better to make sure you have a good few years to help increase your chance of obtaining a mortgage.
Common Self Employed Mortgage FAQ’s
How many years on the books do I need?
You will commonly find that you need to have been self-employed for at least two years, as most lenders will want to see evidence of that time frame. Some self-employed specialist lenders will work off a single year. But as we said, most high street lenders will want a minimum of two years’ accounts.
How will a Lender assess my income?
Most high street lenders will ask for at least 2/3 years’ worth of accounts – detailing income, expenses and operating costs to determine if you are someone who can make timely repayments on your mortgage. Some lenders will also look at retained profits within a business and consider this when assessing affordability.
I’m a Director of my own Limited Company
Even in their own business, a director is classed as an employee. Therefore, most lenders will not asses you unless you own less than 25% of the shares. Lenders add the dividend you have drawn to your annual salary to calculate your yearly earnings. Depending on this figure will determine the maximum amount you can borrow.
Other lenders will work from net profit rather than dividend/salary, which works well for Directors who keep their drawings low.
How much deposit do I need to put down?
The minimum deposit for self-employed mortgage applicants need to put down for a mortgage is 5%. Depending on your accounts, you may find yourself having to put down more.
Can a Self Employed Contractor get a Mortgage?
Contractors have a selective choice of mortgage options. The reasons being more people work from short term contacts these days. Lenders will consider taking your “daily rate” rather than your net profit if you can provide a good track record.
Most high street lenders will ask you how long is remaining on your current contract. Lenders need to have confidence and determine if you are someone who can make timely repayments on your mortgage. It may be possible to get a mortgage in some circumstances if this is the first contract you have had, depending on your circumstances.
Self Employed Mortgage Advice in Birmingham
The variations in lending criteria can entirely depend on the lender for self-employed mortgages, and our Mortgage Advisors in Birmingham will always be open and honest, recommending the best options for your circumstances. Birminghammoneyman is here to take the stress away and answer any mortgage questions you have, both before and during the process.
One of the many perks of using a Mortgage Broker in Birmingham is that we have no ties with any banks, building societies or state agents. The work we do at Birminghammoneyman and the service we provide is purely for the customer. They are the heart of this company, and we only have your best interests at heart.
We have much experience helping and guiding many limited company owners, sole traders, partners that receive a salary, dividends or a mixture of the two. Just by utilising over two decades of mortgage industry knowledge, we can often find solutions for those who need our help.
We can use the wealth of in-depth experience and knowledge we have at our disposal to find you the most suitable mortgage for your personal and financial situation.
Having Mortgage Problems?
Regularly, we contact customers who have faced a measure of difficulty when going direct to their high street mortgage lender for one reason or another. Some of these reasons can include;
- Failed banks criteria
- Fluctuating net profit
- Pay structure
- Credit score
- Personal situation
- Bank won’t lend enough
We recommend not to keep trying lots of other lenders without being completely clued into their strict lending criteria, as this can harm your credit score. As this could hurt your chances of getting a mortgage.