Self Employed Mortgages
Self Employed Mortgages - The Facts You Should Know
Who are self employed mortgages aimed at?
This may sound like a pretty obvious question but actually it is not so straight forward. Specialist self employed mortgages are aimed at borrowers who work for themselves, but usually only when they have less than three years' certified accounts. If they have been in self-employment for more than three years - and have accounts to prove it - a mainstream mortgage can usually be acquired.
Furthermore, self employed mortgages are also sometimes referred to as self-cert mortgages, which encompass other borrowers with non-standard incomes. For example, those with two jobs or with a high level of undeclared earnings like bonuses or commission. Basically self employed mortgages are there to serve borrowers with an irregular income - and/or an irregular way of earning it.
How are self employed mortgages different to standard mortgages?
As the nature of a self-employed salary means is will fluctuate, it will be difficult to give an exact figure of what you earn. Lenders offering self employed mortgages will therefore allow you to present just an estimation of earnings. Although this figure will not be investigated or checked, it will still have to meet the lender's specific criteria for its self employed mortgages - another reason why it can save time and effort to go to a broker.
What are the lending criteria for self employed mortgages?
Self employed mortgages are deemed to be slightly higher risk by lenders. This means borrowers may have to put down a larger deposit of around 20 per cent of the property value. Some lenders may offer mortgages with a lesser deposit however this will depend on the market conditions at the time and therefore checking with your broker is an advantage, as they have access to the whole of the market. A higher interest rate is sometimes also levied on self employed mortgages, depending on your circumstances.
However, as self employed mortgages become more widely available in line with more flexible working patterns in the UK, terms and conditions have gradually been relaxed. In fact, in many cases self employed mortgages now resemble standard deals in terms of the interest rates payable and the deposit required, which in some cases can be as low as five per cent.
Bear in mind however, that self employed mortgages employ the same principal as any other type of home loan; the greater chunk of deposit you put down, the wider the range of lenders will be available to you and the keener interest rate you will pay.
How easy is it to get a self employed mortgage?
Once borrowers are familiar with the criteria of self employed mortgages, getting one is easy - especially if you use a mortgage broker, such as The Self Cert Mortgage Centre, that specialises in the field. And, due to increasing consumer demand, the selection of self employed mortgages is greater than ever, which means lending terms such as borrowing limits, interest rates, tie-ins, and fees are also more competitive. In short self employed mortgages are now on the side of the borrower.
