Self-employed mortgages can be complex. However, if you are self-employed, getting a mortgage is very possible. You'll also be able to get a high-value mortgage if your finances support it. Regardless of how much you want to borrow, knowing what to show lenders, how to use your assets to your advantage and which lenders are most accommodating and accepting of self-employed status is critical for success.
Here are some of the elements Enness’ mortgage brokers can use to make a strong case on your behalf if you want a high-value mortgage and you are self-employed:
If you are a company director in a limited company, it’s likely that you don’t draw out all your profits from the business. Most company directors don’t draw out all their profits to reduce their tax liability. It also doesn’t make business sense to do so: giving yourself a fixed wage that covers your expenses is enough, especially considering your company’s profits will tend to be significantly higher than what you need to live on. While this makes complete sense, it can be problematic when it comes to your mortgage application because your salary and dividends don’t accurately reflect your company’s total income and what you could afford if a lender were to look at your profits.
Enness looks at how your company is structured and will present your case to lenders based on what will be most advantageous for you. Often using your company’s profit will be the most effective way to do this.
Lenders look at many different factors if you are self-employed, but they will usually work on the basis of your average income over the past three years. However, suppose you have changed your operating model or structure in the last twelve months and subsequently seen a substantially better profit than you did last year. In these cases, Enness can approach lenders who will consider your application based on your current figures, rather than last year’s.
Lenders who are open to this approach will need additional confidence that you can sustain your financial improvement in the long term. They will usually want to see management information (i.e., your YTD profit & loss statement) to confirm you are on track to earn a similar amount this year and can do so going forward.
When you started your business, you’ll most likely have put your own money into the company – often in considerable amounts. You may also do this periodically as you grow your company. Naturally, this balance remains owed to you as a director and won’t be taxed when it’s paid back to you. Often, the tax-free status of these loan repayments means that lenders won’t consider this as income, regardless of how much you are due to be reimbursed. This can be challenging, especially when you’ve put significant funds into the start-up or running of your business and would also like a high-value mortgage.
Enness knows which lenders are comfortable using director’s loan income to support your application, often vastly increasing what you will be able to borrow.
It can be harder to get a mortgage if you have recently made changes to your status or the way you structure your business. For example, if you’ve recently changed from a sole trader or partnership to a Limited company. With autonomous access to all the lenders in the market, Enness will be able to source and negotiate lenders who can consider your mortgage application, even when you have recently altered how you run your business.
Contractors are often considered as self-employed individuals by lenders, given they are paid gross and declare their own taxes. Enness regularly work with contractors to source competitive, high-value mortgages as quickly and efficiently as possible.
If you are self-employed and would like to understand your options for a high-value mortgage, get in touch. Enness regularly help self-employed individuals benefit from highly competitive mortgage rates and terms, as well as making your mortgage application and negotiation process smooth, efficient, and stress-free.