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Self Employed Mortgage FAQs, Myths and Facts

Getting ready to apply for a mortgage can seem a scary prospect at the best of times, but the self-employed people there are all sorts of other frightening myths about how difficult it can be to find a mortgage provider willing to lend to you.

The nature of self-employment, compared to what the banks see as the relative stability of being a salaried member of staff, does mean it can be slightly trickier to obtain a mortgage but it by no means rules you out of the property market and if you follow some good practices and work with specialists in dealing with mortgages for for people in your work situation, then you can still live that dream of getting on the property ladder.

With so many horror stories out there, we thought it was time to separate fact from fiction so, with the help of our recommended mortgage company Contractor Mortgages Made Easy (CMME), we have put together this simple guide to some of the most commonly asked questions about mortgages for freelancers:

The self employed need three years of accounts before they can be considered for a mortgage.

False. This hasn’t necessarily been the case for a number of years now and many self-employed contracts and freelance workers have successfully secured mortgages based on their current rate of pay rather than backdated accounts. If you have contracts with clients for ongoing work then these can be enough to qualify for a mortgage rather than accounts from previous years, as special underwriting terms for arranging mortgages for freelance contractors have been negotiated with high street lenders, so CMME can help put you in touch with the right ones.

Lenders will only give mortgages to the self employed who have been working this way for at least six months.

False. This may be the ‘headline’ condition that some mortgage providers will stipulate and it may be the stock answer you are given by call centre staff. But CMME can help you go direct to mortgage providers who understand the unique nature of freelance work and can help you arrange a mortgage so long as you have the evidence that you have ongoing work coming in, irrespective of how long you have been freelancing 

The self employed are considered to be higher risk and so cannot borrow as much.

Again, those lenders who are experienced at dealing with applicants from the worlds of freelance, contract and sole trader work will understand that there is no reason why you would be any higher risk than somebody who is employed directly. So long as you have a deposit and a decent credit rating then you have every chance of being considered ‘low risk’.

You need a huge deposit up to as much as 50 per cent to qualify for a mortgage.

While the 100 per cent mortgages that were once offered no longer exist since the credit crunch, deposits as big as 50 per cent are certainly not a basic requirement. In fact, the average is between 10 per cent and 25 per cent. Rates tend to be more favourable the larger the deposit you have, but there are plenty of lenders willing to lend 90 per cent or even 95 per cent of the value of a property now, and CMME can help you find the mortgages with the best rates to suit the size of your deposit.

The self employed have to pay higher interest rates.

This is another myth, interest rates offered tend to be the same as they are for employed staff applying for mortgages. Often the self employed have been better at putting money aside into savings too, which if that applies to you means you will have a bigger deposit and so qualify for lower interest rates. Again, having a good credit rating is also key to being able to secure decent mortgage rates.

I won’t be able to get a mortgage now that self-certification mortgages are no longer available.

While self-certification mortgages are no longer offered, there are now better ways to secure a mortgage for self-employed workers. Self-certification mortgages did not usually produce the most favourable interest rates, and so you will more likely benefit from choosing a different type of mortgage anyway. As previously mentioned, many high street lenders have agreed to specialist underwriting terms aimed at self-employed people who can show they have regular work in place, so CMME can help you find those who can offer the best mortgage rates.

References are even more complicated for self-employed mortgages.

This is another myth that self-employed mortgages take an age to be approved while the lender seeks references from every man and his dog. But if you apply through an underwriter specialised at dealing with contract-based workers then the application process is greatly simplified.

If you are a freelancer worker, self employed or contractor then there are still plenty of options available to you when looking to take out a mortgage, whether it’s the first rung on the property ladder or you’re looking to remortgage, contact CMME for specialist advice. Call 01489 555080, email easy@contractormortgagesuk.com or fill out the form below:

Contractor Mortgages Made Easy is a trading name of Mortgages Made Easy Limited. Authorised and regulated by the Financial Conduct Authority (FCA reg. 414798).Registered in England No. 4886692 Registered Office: 9 London Road, Southampton SO15 2AE.Your home may be repossessed if you do not keep up repayments on your mortgage.

Why Clients Choose Easy Accountancy

Easy Accountancy offers a low cost, fixed fee accountancy package with all clients receiving their own dedicated, friendly, approachable accountant.

All of our accountants specialise in providing accountancy services to the self-employed, freelancers, sole traders, small to medium sized limited companies and private individuals. All accountants are employees of Easy Accountancy and we never outsource or offshore work.

Our low cost, all-inclusive fixed-fee accountancy service includes unlimited access to your own dedicated accountant throughout the year and covers all your business and personal tax affairs needs.

All our accountancy services include:
  - Unlimited access to your accountant
  - Ongoing advice on how to manage your business
  - Proactive tax advice throughout the year
  - Updates and reminders so you'll never miss a deadline
  - Free bookkeeping software

As a sole trader our fees start at just £60 + VAT a month, for this you receive the above plus:
  - Completion of your Self-Assessment tax return
  - Advice on how much Income Tax to pay
  - Guidance on National Insurance contributions

As a limited company our fixed fee packages are bespoke to your needs, however typically you’ll receive the above, plus:
  - Completion of your year end accounts*
  - Completion and submission of your annual return Companies House
  - The director/s Self Assessment tax return
  - Payroll bureau
  - Dividends and corporation tax computations

We’ve saved our clients up to half on their accountancy bills – if you’d like a quote, click on the quote me button to the right of this page. Alternatively, call us on 0500 234111 / 01442 275767 or email heather@easyaccountancy.co.uk.

*If you would like us to complete your company year end accounts we simply ask that you have been a client of Easy Accountancy for one year or have made 12 monthly payments.