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.
