Self Employed Mortgages - is Self Cert the Answer?
Getting a self employed mortgage has never been that easy and in the current economic climate and credit crunch has become even harder.
In the past few years, self-employed mortgages were obtained mainly as a self-certified mortgage where your income was declared by yourself and not checked. The self cert path has clearly gone now, so what can you do?
Getting Self Employed Mortgages
Getting a mortgage for employed business owners can still be obtained. In general, the rules and products available for employed people are the same. Your income is assessed by producing at least three years of accounts although some lenders will take one-year accounts together with a statement from your accountant of your current run rate. To make life even easier, if you have previous PAYE income to hand or if your partner is employed, these could also be taken into account by your bank.
Banks, brokers, and other lenders will still look into your credit history in any case and although most headline rates offer loan-to-value limits of around 75% higher LTV options are available. You will also be able to choose fixed rate mortgages, capped rates, standard variable rate and base rate plus a percentage.
Some banks however will only lend up to a certain amount, say 65%, then at above this rate they will require you to take out some form of mortgage protection insurance. It may be worth discussing your requirements with a trusted and specialist mortgage broker as the self employed mortgage market can be a minefield.
Choosing the Right Mortgage Lenders
Of course all of the major banks from Barclays, HSBC, Natwest, Halifax, Royal Bank of Scotland, Abbey and Lloyds TSB all lend to self-employed business owners but are more cautious. If you have tried to get a mortgage or remortgage already and had your application rejected or the rates of interest and penalties are too high, be careful what you do next. Repeated applications will show up in your credit history and credit check reports that every lender looks at and this may be a negative sign for any new bank or broker that things are not all fine. In the first instance, we recommend you either talk to your business bank or the bank you have been using for your personal accounts. They have your history already and may be able to take this into account when assessing an offer for you.
Calculating Your Mortgage Repayments
Knowing what you can afford may already be in your mind. As the short-term fixed rate deals increase, you may need to check out your likely repayments. And that's why we have developed a handy online mortgage repayment calculator so you can see what any mortgage or remortgage is going to cost you month by month. It shows the total loan and the interest as well.
Self Employed Mortgage Rates
Current rates for all mortgages are probably around 3% above base rate as a minimum. When searching the internet for deals (which from our research are few and far between) take into account any fees you may have to pay either as an application fee or a product fee. If you employ a broker, get a contract in writing before you instruct them.
Many brokers used to not charge any fees because they received commission from the mortgage company, but the IFA world has now changed. All brokers now charged fixed or variable fees although some also receive commission payments. Fees can be anywhere between £300 and £1,000 depending on your circumstances and how much to want to borrow. Be careful here also because if your broker can not get you a mortgage and you have to find another one there may be more fees involved.