Tips For Getting Approved For Self-Employment Mortgage
If you are self-employed, it may be more of a challenge to secure a mortgage for you. One of the reasons is that income for self-employed individuals is less predictable as compared to the salaried jobs. Also, mortgage lenders consider income for self-employed individuals to be less secure as compared to a salary that comes on a regular basis. However, it does not mean that self-employed individuals cannot get a mortgage. Here is what you need to do in order to get approved for a self-employed mortgage.
Most of the lenders will ask you to provide at least two years of income proof in the form of recent account statements. So, it is recommended to hire the services of an experienced accountant to prepare the account statements in the required format. In addition, you also have the option of providing the SA302 form as a proof of your income. The SA302 form is the self-assessment income form that you have declared to the HMRC. Since these forms take a few weeks to arrive, it is important that you ask for these forms at the earliest.
Do not make the mistake of making any major business changes just before applying for your mortgage. It is recommended to keep your business running in a regular manner for at least six months before you apply for a mortgage. Lenders do not like too much fluctuation as fluctuating income is deemed riskier and you may be denied a mortgage. Also, do not change your business structure immediately before you apply for the mortgage.
Most owners understand the importance of retaining as much profit as possible within the business in order to grow the business at a fast rate. However, it may work as an impediment when you’re trying to secure a mortgage. Your chances of getting approved for a mortgage will increase in case you pay a higher dividend or a higher share of the profits to yourself in order to enhance your income. It will also allow you to make a much bigger deposit that will also increase your chances of securing a mortgage.
An important tip that will help you in lowering the interest rates is to make as big a deposit as you can afford. A bigger deposit right at the start will result in lower repayments and you will also get some discount on the interest rate. Ask your bank about the deposit bands as most banks offer significantly lower rates for higher deposits.
If you have everything in order and are confident that you will be approved, there is still a chance that your lender does not approve your mortgage application. It does not mean that all the lenders have same criteria for approval of mortgages. Each lender has its own criteria and another lender may view your circumstances more favourably. It is recommended to use the services of a specialist mortgage adviser who has experience with a self-employed mortgage. They are typically aware of the criteria used by different lenders and are also aware of the lenders who are friendly to self-employed individuals.
Overall, it has now become easier for self-employed to get approved for a mortgage but you need to keep the above-mentioned tips in mind in order to get the best deal for a mortgage as a self-employed individual.