If you’re self-employed, you may be wondering what the likelihood of you being accepted for a mortgage is.
As you know, when you’re self-employed your income may be irregular and you may not have three years worth of accounts, which you may feel will hold you back when it comes to obtaining a mortgage. However, you’ll be pleased to hear that being self-employed doesn’t have to hold you back when it comes to obtaining a mortgage.
What is a ‘self-employed mortgage’?
There is no such thing as a self-employed mortgage. However, if you’re self-employed and looking to obtain a mortgage, rest assured it is possible. You may just need to do a little bit more than someone on a salary to prove to a mortgage lender that your income is reliable. That doesn’t have to be difficult, especially with the help of a mortgage broker, like us.
What can self-employed people do to better their mortgage chances?
If you’re self-employed and you don’t have at least three years worth of accounts, do not fear, as you may still be able to get a mortgage.
It may also come as a relief to you that many mortgage lenders do not just look at the numbers when approving a mortgage, many other different factors play a role. But there are steps you can take to improve your chances of obtaining a mortgage that is most suitable for your needs and circumstances.
Speak to a mortgage broker
Firstly, in order to ensure that you get the best mortgage deal for your needs and circumstances, we highly recommend that you seek expert advice from a specialist mortgage broker.
This is because mortgage brokers deal with individual circumstances every single day and will be able to provide you with the most honest and reliable advice for your needs, especially if you’re self-employed.
You may even be surprised to hear that not all lenders have the same criteria and a broker can help you assess what deals are available and match you with the most suitable one for you.
Types of mortgage
The type of mortgage can also impact the rate you get.
Fixed rate mortgage
A fixed rate mortgage is where you pay the same amount at the same rate for a set period of time, usually between 2 and 5 years. Your rate remains the same regardless of changes in the lender’s or Bank of England’s interest rates. At the end of your fixed rate deal, you’ll fall onto your lender’s Standard Variable Rate (SVR) which is often a higher rate than you were paying. It’s often good to ensure you have a new produce in place before this ends.
A tracker mortgage quite literally tracks the Bank of England base rate and increases or decreases your mortgage interest rate as it rises and falls.
For example, if the BofE base rate is at 0.75% and the lender applies an additional 1.25%, your mortgage interest rate will be 2%. Should the base rate rise to 1%, the lender will continue to apply their 1.25% and your mortgage interest rate will be 2.25%.
Check your credit score
You can check your credit score for free on ClearScore, Experian or Credit Karma (just to name a few) so you can see where you’re currently sat. These credit scoring apps can be highly beneficial in a multitude of ways as they can tell you how much debt you’re currently in (if you’re in any) and can tell you things that you can do to improve your credit score to boost your chances of being accepted for that perfect mortgage.
However, there isn’t a specific score that you need in order to obtain a mortgage as there isn’t just one credit score. However, Experian gives you a rough guide of what different credit scores could get you in terms of mortgages. According to Experian, with a score between 0-560, you may be declined a mortgage or find it more difficult to obtain one without facing high-interest rates.
Alternatively, with a score between 961-999, you could get access to the best mortgage deals and benefit from lower interest rates. However, it’s important to remember that this is just a rough guide and is not definitive. You can find out more about the scores and what they could get you here.
Ensure your accounts are up-to-date
This step goes hand-in-hand with improving your credit score because if you want to achieve the most competitive rates, you’ll need to have an impeccable credit rating. Therefore, it’s vital to ensure that your bills and payments are paid on time each month, otherwise, it could damage your credit score and reduce the number of mortgage options open to you.
Why choose us for self-employed mortgages
If you’re a self-employed individual looking to obtain a mortgage and move home, you may need to prove your income more so than someone applying for a mortgage with a steady income. This means gathering bank statements, years of accounts and SA302 forms, providing that you have them.
However, if you have a lack of these, not to worry. As we are an experienced broker, we help self-employed individuals find the right mortgage for their needs every single day. If you want to find out how we can help you, all you need to do is contact The Mortgage Consultancy.