One of the concerns people have when they first become self-employed or take the plunge to working on a contract basis, is how it will affect their chances of getting or renewing a mortgage. There’s no point in glossing over it – it certainly can be harder for self-employed business people to obtain financing and at a time when mortgages remain harder to come by in general, with lenders favouring the ‘safest bets’ with steady incomes, it is potentially even tougher. Since the second quarter of 2007 the proportion of home loans to the self-employed has declined from 16% to 10% of the total.
The longer you’ve been a successful contractor the better of course, with two years demonstrable self-employed history, with sets of accounts, and six months or more of a current contract to go, putting you in a good position. The truth is though, that with a non-permanent income, or only a short history of being self-employed, you are unlikely to be able to access the very best interest rates out there.
However, with the economy and housing market generally looking up, more options are opening up for self-employed people looking for a mortgage. Of the large lenders, Halifax, Woolwich, Virgin and Clydesdale are some of the names generally considered most open to contractors. Recently, a few smaller specialist providers have also shown their hand, with Saffron Building Society, Kensington and Skipton Building Society all launching specific products or offering clarity around existing products for contractors. The rates might not be the absolute rock-bottom available in the market but they are reasonable and deposit of requirements of between 10% and 40% are catered for in the mix, though having a 12 month period of contract work is still recommended as a good start point for ensuring success before delving into the market.
Longer periods of continuous work, healthy sets of accounts and a good credit history will all boost your chances of not only getting a deal but landing a good one.
However, the use of a good broker is strongly recommended, as they have detailed and wide-ranging market knowledge and will help you find the best and most flexible deals that match your circumstances and eligibility criteria.
Let us know if we can help!