Those who are self-employed have always faced a more difficult process when it comes to securing a mortgage; a recent study by The Mortgage Lender found that 71% of the self-employed borrowers they surveyed felt discriminated against because of their employment status.
Despite the perception that being self-employed means getting a mortgage is hard (one in four surveyed said that they had been put off buying a property because of this), there are lenders out there that will work with you rather than against you.
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Ultimately when applying for a mortgage, the self-employed have exactly the same mortgage products available to them and, despite the common misconception, they are not constrained to niche lenders, as many of the mainstream lenders routinely lend to the self-employed.
For sole trader borrowers that show an increasing net profit, both Santander and Coventry building society are particularly good options. Both will consider the most recent year of trading in certain circumstances, which can make a big difference in stated income figures.
For those trading as a limited company, lenders like HSBC, Coventry and Virgin Money are a better bet as their calculations work on salary and share of net profit rather than dividends. However, if you have a 100% shareholding, you will find more lenders willing to consider you.
There are lenders for borrowers that have only been trading for one year
For those that have only been trading for one year and think the mortgage market is closed, don’t despair; Kent Reliance, Aldermore Bank, Kensington, Vida Homeloans and Precise Mortgages might all consider borrowers in these circumstances and will evaluate each case individually. Borrowers should just be aware that some lenders’ rates may be slightly higher. For example, the Precise two-year fixed rate is 2.59% – higher than the average two-year fixed rate of 2.35% – so it is worth shopping around and comparing lenders.
With the number of self-employed people doubling in the UK in the past year, lenders will soon be forced to adapt and offer better services to their increasing consumer base of self-employed. In the meantime, locating a good broker that specialises in self-employed mortgages might be the best option for many looking for a good mortgage deal.