Due to the change in work patterns, we are seeing that being self-employed is more common than ever in Birmingham.
As a Mortgage Broker in Birmingham, we are rarely seeing people planning to stay with their first employer throughout retirement. They want to change their jobs to improve their personal development and financial situation.
Now there are a vast amount of opportunities for self-employed and freelances within the digital sector, with how the world is getting more technological advance we are becoming more and more interconnected.
We are always continually learning, and more doors open for opportunities for the self-employed with these industries.
A while back, it uses to be challenging to get a mortgage while being self-employed. Now the situation is becoming more accessible and easier to get a mortgage; more gaps are opening in the market; lenders are becoming more relaxed and lenient with self-employed applicants.
You need to get you ahead of the mortgage game, we have put together some helpful mortgage tips if you are self-employed and thinking of moving home in the Birmingham area, or perhaps you are a First-Time Buyer in Birmingham, were sure that you would find our service valuable.
The minimum you will need is one year’s accounts to get a mortgage. If you go with a self-employed specialist lender, you will find that they often work off a single year. High street lenders are stricter and will want two year’s accounts.
Unfortunately, statistics show that most new ventures end up being unsuccessful, and this is why lenders always need you to evidence your track record.
Most lenders will look at the average of your last two years’ worth of income. Although, if your business has grown over the past year and the lenders can see that you will be able to afford a mortgage and run your company, they will go off the latest year and ignore anything that happened before.
If you are a director of your own limited company, you are technically an employee of your own business. Lenders don’t see it like that and will only assess you as an employee if you own less than 25% of company shares.
Lenders often add the dividend you have drawn to your annual salary as a way to work out your yearly earnings. The amount that you can borrow for your mortgage will be based on a multiple of this figure.
You will find the odd lender that will work from your net profit rather than your salary/dividend. It works in favor of directors who like keeping their drawings low.
As an experienced Mortgage Broker in Birmingham, we always get asked this! During your annual meeting with your accountant, you will talk about how to minimize your tax liability.
It works the other way when it comes to taking out a self-employed mortgage, the more income you have declared, the bigger the mortgage you can get.
You need a minimum of a 5% deposit for a self-employed mortgage. It’s precisely the same as employees. If you only have one years’ accounts, you might have to put down slightly more to increase your chances.
For contractors, there are lots of different mortgage options available. Nowadays, it’s more common to find people working from short-term contracts.
If you can evidence a good track record, your lender can consider taking your ‘daily rate’ over your net profit. These benefits contractors as lenders will consider treating you as self-employed instead if that works out better.
You will need to know long is left on your current contract as lenders will ask you this. They must be sure that your income will be ongoing, so they know whether or not that you will be able to afford your mortgage.
It is even possible to get a mortgage when you are on your first contract. Of course, this all depends on your specific circumstances.
You can no longer get a self-cert mortgage as they mistreated. No plans for these to make a return anytime soon.
We know that trying to get a mortgage as a sole trader, partner or company director can be difficult. It can be much easier for an employed applicant. Depending on the lender that you go to, some are stricter with their criteria than others.
It is why approaching a local Mortgage Broker in Birmingham, like us, could benefit you.
We can give you a realistic expectation from the start. Guiding you through the self-employed mortgage process and search through thousands of mortgage deals on your behalf.
Every customer can receive a free initial Mortgage Consultation, so make sure that you get in touch with one of our Self-Employed Mortgage Advisors today.
We can talk you through the best route for you to take based on your self-employment history.