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Mythbusting with Morris: Why a residential mortgage isn’t out of reach for self-employed customers

 Roger Morris

Roger Morris – Group Distribution Director

Published 13.05.2021

It’s never been easy for self-employed workers to secure a residential mortgage with mainstream lenders. Only one year’s accounts? Try again this time next year. Changes in trading style over the past 12 months? Sorry, can’t help. A missed credit card payment? Forget it.

Despite the fact there are more than 4.3 million people working for themselves*, the high street has sometimes viewed them with suspicion, often deeming their circumstances as being too complex or too unpredictable.

COVID-19 has only compounded the problem, with the stricter criteria many lenders have imposed since the outbreak of the pandemic making things even more difficult for the self-employed.

This is when you as a broker can help and why it’s more important than ever that you’re ready to help those who are struggling to find a residential mortgage they need.

When it comes to their application, encourage them to tell their story, explaining the type of work that they do, their journey over the past 12 months and how the pandemic has affected their income.

If their accounts have been provided by an accountant, ask for a covering letter confirming the customer’s current trading position, how it relates to their most recent tax return or set of accounts and how this corresponds to their business or personal bank statements.

It’s important to also remember that any income that’s being used to support their affordability needs to be evidenced with bank statements. The statements should reflect their current income position according to their most recent tax return and shouldn’t contain any unpleasant surprises, such as an undisclosed debt management plan.

Of course, it helps even more if you know a lender who can support you every step of the way with your self-employed customers’ applications.

Precise Mortgages understands the challenges and complexities of these cases, and has designed a range of residential mortgages products and criteria specifically for those who work for themselves.

Whether your customer is newly self-employed or has a long-established business, here’s how we can help:

  • We’ll consider applications with only 1 year’s accounts or Tax Calculation.
  • Changes in trading style during the last 12 months accepted.
  • Less than perfect credit considered – defaults, CCJs and secured and unsecured arrears.
  • Car allowance and 100% of pension contributions accepted as part of total annual income.
  • Limited companies, sole traders and partnerships accepted.

To find out more, see our residential mortgages product guide, view our online criteria guide or speak with a member of our sales team.

Source:https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/employeesandselfemployedbyindustryemp14 (Oct-Dec 2020)


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