Nowadays, we find that self-employment is more common than ever across the country, with that also being the case in Birmingham.
As a Mortgage Broker in Birmingham, we are rarely seeing people remaining with their first employer from the first few years, all the way throughout retirement. Over time, they want to change their career paths in order to improve their personal development and financial circumstances.
In recent years, there are a lot more different opportunities for self-employed and freelancers within the digital sector. The world is getting increasingly more technological advanced, and we as people are becoming more and more interconnected. We are always learning, and are continually taking advantage of the opportunities that appear for the self-employed within these industries.
In years prior, it used to be quite a challenge trying to get a mortgage while being Self-Employed. Now we find that it is a lot easier to get a mortgage as a Self-Employed applicant, with more gaps are opening in the market and lenders becoming more relaxed and lenient with these applicants.
You need to make sure you are ahead of the mortgage game. In order to help you reach that point, we have put together some helpful mortgage tips for those who are Self-Employed and thinking of Moving Home in the Birmingham area, or perhaps are a First-Time Buyer in Birmingham.
If you end up going with a self-employed specialist lender, you will find that they often require you to provide one years accounts. High street lenders have a tendency to be a lot more stricter and will want to see two year’s accounts.
Unfortunately, statistics will show that most new business attempts will end up being unsuccessful, and this is why lenders always need you to evidence your track record, before they’ll allow you to borrow such a large amount of money.
Most lenders will have a look at the average of your last two years’ worth of income. That being said, 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 simultaneously, they will go off the latest year and may ignore anything that has happened previously.
If you are a director of your own limited company, you are technically an employee of your own business. Lenders won’t see your situation that way and will only assess you as an employee if you own less than 25% of the companies shares.
Lenders often add the dividend you have drawn to your annual salary as a way to work out what your yearly earnings will be. The amount that you are able to borrow for your mortgage will be based on a multiple of these earnings.
You will find that sometimes there will be lenders that will work from your net profit, rather than your salary/dividend. The way this works is favourable for directors who like keeping their drawings low.
As an experienced Mortgage Broker in Birmingham, this is something we get asked quite often. During your annual meeting with your accountant, you will be able to 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 may be able to obtain.
The minimum deposit self employed applicants are putting down are a 5% deposit for a self-employed mortgage. It’s works the same way as it does with regular employees. If you only have one years’ accounts, you might have to put down a little bit more for your deposit, in order to increase your chances of finding success.
For contractors, there are various different mortgage options that are available to them. It’s more common now to find people working from shorter term contracts.
If you are able to evidence that you have a good track record, your lender can consider taking your ‘daily rate’ over your net profit. This will be a benefit to contractors, as lenders will consider treating you as self-employed instead if that works out better for your situation.
You will need to know long is left on your current contract, as lenders will be asking you this. They must be sure that your income will be continuous, so they know whether or not that you will be able to afford your mortgage. It may even possible to get a mortgage when you are on your first contract, though this all depends on your specific circumstances.
You can no longer get a self-cert mortgage. They were mistreated and there are no plans for these to make a return.
We know that trying to get a mortgage as a sole trader, partner or company director can be challenging. It can be much easier for an employed applicant, as depending on the lender that you go to, some are stricter with their criteria than others. This is why if you Get in Touch with a Mortgage Broker in Birmingham, you could reap the benefits.
Our mortgage advisors will give you a realistic expectation from the start, guiding you through the self-employed mortgage process and searching through thousands of mortgage deals on your behalf.
Every customer will receive a free initial Mortgage Consultation, so make sure that you get in touch with one of our Self-Employed Mortgage Advisors in Birmingham today.