It’s a common misconception that there is a specific mortgage for the self-employed. In reality, the self-employed are given access to a smaller range of lending products, but once they pass the initial checks, they are treated the same as any other borrower. The good news is that Newcastle Building Society is expanding the range of mortgages available to the self-employed. This marks a huge step forward for the self-employed community, which is growing every year.
This new range of mortgages is specifically designed to help the newly self-employed. This means that anyone with one full year of accounts and with under two years of trading history will be eligible. The newly self-employed will now be able to access the popular Help to Buy mortgage and a buy-to-let mortgage.
The Help to Buy mortgages will feature a pair of two-year fixed rate products at 75% LTV (loan to value). It is hoped that the Help to Buy scheme will help first-time buyers to get on the property ladder while the buy-to-let mortgage will help more self-employed people to diversify their incomes by becoming landlords.
With more people choosing to go down the self-employed route than ever before, the mortgage industry is struggling to keep pace. Some lenders, like Newcastle Building Society, will also look to other evidence of income to help support and application. This means they will consider future work contracts or retainers as proof that your income will continue as normal or increase. They also recognise that income will not be the same for the self-employed as it is for salaried workers. All of these steps help to make it easier for the self-employed to access the same financial products as everyone else.
The self-cert mortgage has been banned in the UK since 2011. Before the credit crunch, the self-employed could secure a mortgage by simply stating their earnings. No proof was required, and this led to some people cheating the system and borrowing more than they could afford. As a result, this type of mortgage has now been banned and the self-employed have to provide evidence of earnings. Unfortunately, the new checks unfairly penalise the self-employed for choosing to be their own boss.
The new products launched by Newcastle Building Society were also accompanied by a shift in the way self-employed individuals are assessed. Rather than enforcing a blanket list of requirements and automatic exclusions, the Building Society has committed to considering every applicant on their own merits. This is a unique approach to self-employed mortgages that is not yet widespread in the industry.
The self-employed face a unique challenge as the mortgage industry struggles to keep pace with the changing workforce. In the meantime, there are steps individuals can take to increase their chances of securing a mortgage. First, self-employed individuals should shop around and not assume that one rejection means that all providers will reject them. Second, they should pay close attention to their credit scores and make any corrections before submitting an application. And finally, they should make sure their accounts and up-to-date and accurate, as this is the only measure of income that a lender can consider.
While it might be more difficult, it is in no way impossible to secure a mortgage when you are self-employed. You may need to just through a few more hoops, but if your dream is to own a home, then it will all be worth it in the end.