Self Employed/Income Worries
If your income isn’t from a straight-forward employed salary, you may have had trouble finding a lender who will consider your application or found getting a mortgage approved difficult. Thankfully, where certain lenders find fault and decline seemingly for no reason, others are happy to lend – every lender has different opinion and criteria.
At Advantage, we understand that everyone’s circumstances are different, and that income can come from various sources. We have arranged mortgages for the experienced self employed professional, to foster carers, to CIS & Contract workers.
I’m Self Employed. Don’t I need 3 years worth of income?
If you are self-employed you will have the widest choice of lenders available if you have been self-employed for 3 years or more and have accounts to support your application.
However, there are lenders who will accept fewer years of self-employment, some as few as one years, if you also meet the required affordability criteria. A healthy deposit will improve your chances of obtaining a lower rate.
I’m Self Employed. Don’t my profits need to go up every year?
Some lenders consider businesses that have had a decline in profits in recent years, whereas others won’t consider a drop of £1!
Either way we can help in these kinds of situations, it all depends on why the profit has dropped and by how much.
I’m a limited company director – Don’t I have to take income out of the company, to use it for a mortgage?
Yes and no! Most lenders use your director’s salary and dividends only, to calculate how much you can borrow.
However, we are able to arrange market leading mortgages where lenders will use your director’s salary, plus your share of the companies profit. Afterall, this is money the company generated, you simply chose not to draw it out. For certain individuals, this can be a much larger figure, leading to a much larger available mortgage.
What do you need for a self-employed mortgage?
If you’re self-employed and need a mortgage, the main way a lender will verify your income is through:
- SOLE TRADER:
- Your ‘profit from self-employment’ on your SA302’s or online tax calculations and overviews.
- Your share of net profit (if using accounts)
- Your share of total income received (if using SA302’s)
- LTD COMPANY:
- Your share of director’s salary
- Your share of dividends or the company’s net profit. This can be before or after corporation tax, dependent on the lender
- Lender’s will typically use full accountants signed off by a suitably qualified accountant or an signed accountant’s reference from them.
I work on a CIS (Construction Industry Scheme) basis. What income will a lender accept?!
The issue for CIS workers is that most lenders use your self-employed ‘profit’ not the income from your CIS slips. As you are likely to write off expenses throughout the year to reduce your tax bill, the ‘profit’ on your SA302’s/tax calculations is likely to be lower than on your CIS slips.
However, we specialise in mortgages for CIS workers and can arrange higher borrowing amounts using your CIS slips. Depending on your circumstances, the average of your most recent 3, 6, or 12 months slips or even your profit from your SA302’s could get the best result for you. Book an appointment, create your own secure online client case and start.
Taxation planning is not regulated by the Financial Conduct Authority.
I’m a contractor – will lenders accept my income?
As your contract is not permanent, lenders will often need greater reassurance in your ability to sustain work and income levels. Therefore, they will normally look at:
Your industry experience.
Your experience contracting and if the contract has been renewed before.
How long you have been earning at your current levels.
How long is left on your current contract or if it is to be renewed.
What other incomes might lenders accept?
- Gross basic income
- Car / town / shift allowances
- Mortgage subsidy
- Other cash employer benefits
- Investment income
- Rental income
- Trust income
- Income earned overseas
- Income earned in a foreign currency
- State benefits
- And more…
It’s important to remember that every lender is different. They all have a varied opinion on a massive range of criteria, which can make finding the right mortgage very complex.
This criteria also changes all the time, as every lender alters their stance on what is and is not acceptable – for this reason it would be inappropriate to list lenders as it could very soon be outdated.
The important thing to note here is that if you’re having trouble finding a lender to accept your unique situation don’t give up. Give us a call and see how we can help