Following the withdrawal of self certification mortgages from the market, the choice for the self employed borrower has diminished somewhat. The principle of a self certification (or self cert) mortgage was that if you worked for yourself, you couldn't rely on a regular salary, payslips or a P60 to prove your income - so you didn't. You declared roughly what you thought you earned and the lender would lend you a sum accordingly, without you having to provide proof of income such as audited accounts.
However, the 2008 recession brought an abrupt end to these rather controversial products and they have now been axed altogether.
The removal of self cert mortgages from the market has made it much more difficult for some people to secure finance that they would previously have been able to obtain. There is unfortunately no easy fix to this problem - but we can make it easier to understand the way a potential lender will assess your mortgage application to give you the opportunity to prepare the required documents and information.
Have a read through and when you're ready give us a call on 01225 719043 or use the 'contact us' page to get in touch and we'll talk you through the finer detail.
I'VE ONLY JUST STARTED UP MY BUSINESS - CAN I GET A MORTGAGE?
You will need to provide at least one year's full signed accounts before you will be considered for a mortgage. More than likely you will be asked for 2 year's figures but there are a couple of lenders willing to consider just one year plus a projection from a qualified accountant.
I'M A DIRECTOR OF A LTD COMPANY - SO I'M EMPLOYED, RIGHT?
Generally, if you own less than 20-25% of the shares in the company, you will be treated as an employee and the lender will lend based on the figures on your payslip. If you own a higher level of shares then you will be treated a self employed and the lender will require 2 years evidence of salary and dividends or your share of the company's net profit
WHAT INCOME WILL A LENDER USE WHEN ASSESSING MY APPLICATION?
Sole Trader: For a sole trader usually 2 years NET PROFIT figures will be required, although it can be possible to use 1 year + a projection by a qualified accountant.
Partnership: As per 'Sole Trader' but only your share of the profits will be taken into account.
Director of a Ltd Co: This is the one that causes most confusion. Lender's will largely use 2 years Salary + Dividends, but some will use Salary + your share of the Net Profit (after corporation tax)
WHAT DOCUMENTS WILL I NEED TO PROVIDE TO PROVE MY INCOME?
Lenders will generally accept the following:
Tax document SA302 (the document issued by HMRC to confirm the income you have declared on your tax return)
Full signed company accounts prepared by a fully qualified accountant
An accountant's reference (the lender will send their own reference directly to the accountant)
I BOUGHT MY HOUSE WITH A SELF CERT MORTGAGE - WILL I BE ABLE TO REMORTGAGE / MOVE?
If you're unable to prove enough income to support the new mortgage (or the current balance if trying to remortgage) then you may be 'locked in' to your current property / mortgage deal. However, some lenders have special rules in place for existing customers moving house that may help. If you need help then we can often deal with this on your behalf, depending on your lender.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
We always aim to provide a high quality service to our customers. However, if you encounter any problems and we are unable to resolve them you can take your complaint to an independant ombudsman. Our advice is covered under the Financial Ombudsman Service (http://www.financial-ombudsman.org.uk/consumer/complaints.htm). You may be able to submit a claim through the EU Online Dispute Resolution Platform (https://webgate.ec.europa.eu/odr/main/?event=main.home.show if you live outside the United Kingdom or if you prefer not to deal directly with the Financial Ombudsman Service.)
The overall cost for comparison is 8.7% APR for customers who may have their access to credit restricted.
FX Mortgages is an appointed representative of Mortgage Intelligence Ltd which is authorised and regulated by Financial Conduct Authority under number 305330 in respect of mortgage, insurance and consumer credit mediation activities only.