Self employed mortgages and mortgage lenders

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UK self employment

Lenders attitude to the self employed

The self employed mortgage can still be obtained by most applicants with a profitable business, but just how keen are mortgage lenders to offer mortgages for the self employed in today’s market?

There is no doubt that the mortgage lender sees the employed applicant as a better bet for lending – steady income, low risk, and income easily proved with wage slips and bank statements.

Why do mortgage lenders persist with the self employed?

So why do lenders not just ignore self employed applicants altogether? Would that not make for easier mortgage lending decisions?

It is true that the self-employed only make up 17% of the workforce in the UK but perhaps what is more important is the demographic of the self employed.

Since the self-employed are generally more mature and many of them live in the South, this leads to many of the larger mortgage cases being requested by self-employed applicants.

As a result, the mortgage lender ignores the self-employed at the risk of losing access to some of the larger mortgage cases available.

Underwriting self-employed mortgages

The general rule with lenders and the self-employed is that if the business is profitable over a number of years and the self-employed applicant draws sufficient profit from the business, the lending decision is favourable.

The problems occur when:

  • Business profit fluctuates
  • Profit is retained in the business
  • There is a limited business track record
  • Limited companies have ‘A’ and ‘B’ shares
  • Applicants have changing self-employed trading styles

Whilst the above issues cause complications for the self-employed applicant, they can be managed by an experienced mortgage broker in many cases

Self-employed mortgage rates

The good news is that the self-employed can enjoy mortgage rates as keen as the employed applicant. It is very rare for a self employed mortgage offer to be priced differently from the employed equivalent.

Self employed mortgage applications

What is most important for mortgages for the self employed is making sure you get advice from a good independent mortgage adviser. A mortgage adviser with extensive experience in the self employed mortgage market.

With a consistent, profitable business to support their application – backed with the right advice, the self-employed mortgage seeker has a good chance of being successful.

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