In the UK, almost five million individuals are currently self-employed. As this figure is only expected to rise, a growing number of owners or would-be buyers will be seeking self-employed mortgages.
Unfortunately, for those requiring large loans, self-employed mortgages can be a complex area. But, despite the difficulties, it’s far from impossible – providing you have the right contacts.
Why is it difficult to arrange self-employed mortgages?
In years gone by, arranging a self-employed mortgage was fairly straightforward, because borrowers were able to self-certify their earnings to take out a loan. Following the financial crisis, however, the application process became more stringent – and actually securing mortgages in general became far more difficult.
For high net worth individuals (HNWIs), the challenges grows. Arranging finance over £1 million is tricky in general, particularly if you need a high loan to value (LTV) mortgage or interest-only finance. Likewise, self-employed individuals who are also foreign nationals or expats will often find it incredibly challenging to secure favourable terms.
The trouble arises when it comes to establishing how much self-employed borrowers can actually borrow. When mainstream lenders assess affordability, they usually take a ‘tick-box’ approach, using a fairly basic calculation based on an applicant’s annual salary – which can be worked out using payslips.
For the self-employed, affordability calculations are more complex. Especially if you have a large income, multiple income streams, draw income from your business in an unconventional way, have only been self-employed for a short period, or have other complicating factors in your background.
What’s the solution?
The solution is to work with niche lenders, who are experienced in dealing with self-employed HNWIs. These lenders can understand and account for complex requirements – such as those who leave profits within their business, rather than drawing a large salary.
Such lenders are also typically able to offer more complex finance terms, such as interest-only loans or high LTV finance. However, the nature of these lenders is that they generally can’t be easily accessed on the high street – you’ll need to work via an intermediary to procure the most favourable deals.
That’s where the services of a HNW broker like Articus Finance become invaluable. As you can see from our case studies, we already have the crucial relationships in place – as well as the ability to understand and negotiate terms for complex clients, like foreign nationals.
But ultimately, the terms you will be able to secure as a self-employed applicant will depend on your unique circumstances – so if you’d like to gain a sense of how we can help you, get in touch today and one of our brokers would be happy to advise.
While lenders have become somewhat more flexible in recent years, securing finance over £1 million is still challenging, whether you’re self-employed or otherwise. Our guide, Overcoming the challenges of the £1 million plus mortgage, reveals everything you need to know about navigating this world successfully.
