The Mortgage Mum - Getting a mortgage when you are self-employed – the basics!
The Mortgage Mum – Money Matters!
Getting a mortgage when you are self-employed – the basics!
If you are a business owner and you are trying to get a mortgage, these are the main things you need to know! Firstly, your mortgage will be the same as anyone else’s; it’s just the way you prove your income is different and you need to be a bit more organised! Generally, we like to see 2 years of accounts; however, there are now lenders who will allow you to apply for a mortgage with just 1 year. The main issue I come across is people minimising their income for tax purposes and then struggling to borrow what they need to get the mortgage they want! My advice would be to work backwards if you are thinking of moving home, remortgaging or getting your first mortgage. Speak to a broker and they’ll be able to tell you how much you need to earn to borrow what you’re looking for. Then use this figure when doing your accounts for the 2 years leading up to it, meaning you may decide to reduce your expenses to allow you to declare the additional income you need.
The other factor to consider is HOW your business is set-up – sole trader, partnership or Limited Company. If you are a sole trader we’ll be looking for your net profit figures based on your SA302, tax year overview and tax calculations documents. If you are a Limited Company we are looking at the salary and dividends figures. Again, there are some lenders who will look at salary & your share of the net profit but you’ll need a broker to navigate the market for you! For a partnership we will be looking at your share of the net profit. We will take an average of the 2 years; however, if your latest year is a lot better there are some lenders who will base your affordability on the last years figures. Your broker will know who these lenders are so make sure you get a good one! Likewise, if your latest year is lower we will need to know why and use this lower figure for affordability.
If you are working in the construction industry, and are a CIS contractor, you may be considered as employed and this can be beneficial!
You can contact The Mortgage Mum on her website www.themortgagemum.co.uk or on her social pages. Get in touch today if you have a mortgage enquiry or if you think you may be interested in becoming a Mortgage Mum yourself!