Six top tips for self-employed borrowers
Over half of the self employed in the UK think their financial situation has become worse over the past year, said Aldermore.
Research by the bank found that three in five (59%) say their monthly earnings have decreased since the pandemic began, and two in five (38%) are less confident about their business’s future since the pandemic began.
This has led to one in four (23%) self employed workers in the UK saying conditions have become so difficult they’re considering stopping being self employed altogether.
Only one in nine (14%) of self-employed have a consistent income month-to-month making it difficult to secure mortgages with high street lenders.
Jon Cooper, head of mortgage distribution at Aldermore said: “The self employed sector make up a significant proportion of the workforce and is a breeding ground for innovation and advancement in many industries, so they will play an important part in the UK’s economic recovery post-Covid.
“For the self employed that may feel pessimistic about their future home buying prospects after this difficult period, there are options available to help.
“It’s important to seek advice from a broker who can provide whole of market experience and to explore specialist lenders options, as they function to dig into the detail of an applicant that may have complicated income streams lifting traditional barriers to getting on the housing ladder.”
Get mortgage ready
Aldermore has published its top tips for self-employed people looking to get a mortgage:
1. Consider using a broker: The home buying journey can be a complicated journey so having an experienced guide throughout can make all the difference. Brokers have whole-of-market experience so can outline all the options available to fit an applicant’s individual circumstances.
2. Evidence two to three years of accounts: Lenders will typically ask to look at two to three years’ worth of accounts, as proof you have a good level of income. Since Covid-19, it is also important to show your business has recovered to pre-pandemic levels to instil confidence in the lender you can meet mortgage repayments.
3. Get your accounts in order: You will need to provide documentation to prove your income, which will vary depending on the lender. Making sure you know which documents lenders will ask of you and having this to hand will save time and help speed up the process.
4. Evidence a steady stream of work: To prove that you’re a reliable borrower, it’s important to demonstrate a steady stream of work that has been maintained over time. It is equally important to show a strong pipeline of upcoming work to reassure lenders.
5. Improve your credit profile: There are many ways to boost your credit profile. Simple steps such as registering on the electoral roll, paying off debts and meeting regular payments will over time make a difference.
6. Save a bigger deposit: Having a bigger deposit will better your chances of securing a mortgage and demonstrate you aren’t a risk to lend to. Review your monthly expenditure to see where you can afford to cut back and put towards saving for a deposit and utilise fixed term savings accounts to benefit from a more favourable interest rate.