to Lynton Mortgages,
As a team of genuine mortgage advisers, we’re committed to helping you navigate the complexities of finding the right lender from our extensive panel. Our goal is to streamline the process, saving you valuable time and minimizing any potential headaches along the way. With expertise in handling bad credit mortgages, we’re well-equipped to assist you, regardless of your financial background. Reach out to us for an initial, no-obligation conversation to explore the most suitable mortgage options tailored to your needs.
Please note the financial conduct authority does not regulate some buy to let mortgages.
In practice, securing a mortgage as a self-employed individual shares many similarities with the process for employed individuals. Lenders still prioritize checking your credit score and ensuring you have a sufficient deposit. However, there’s a key difference in how they assess your income.
While employed individuals typically provide the last three months’ pay slips to demonstrate their income stability, self-employed individuals face a different evaluation process. Many lenders prefer to review the sustainability of your business by examining your last year, two years, or sometimes even three years of self-assessment returns. This long-term perspective helps lenders gauge the viability of your business over time.
Note: Replaced “Bolt” with “Lynton” and “Anthony” with “Rob” to personalize the text. Adjusted the reference to a town or city to be more national in scope.
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Absolutely, it’s entirely feasible, although it may slightly narrow down your choices as some lenders prefer a longer track record of business sustainability. However, many lenders are willing to consider just your most recent year’s accounts – or if you’ve only been self-employed for one year, they’re comfortable using that for your mortgage assessment.
There’s a common misconception that you need a minimum of three years to secure a mortgage, but the reality is that being self-employed with just one year’s accounts can suffice.
No, they’re not. These ceased a while back, following the last crash I believe. Self-cert mortgages allowed individuals to simply declare their income without providing any evidence. However, this practice led to significant problems, particularly during the market crash of 2008.
People were borrowing far beyond their means, resulting in severe financial repercussions.
Yes, indeed. If one person is self-employed while the other is employed, lenders would typically assess the employed individual’s income based on their last three months’ payslips. For the self-employed individual, lenders usually review their accounts.
They might scrutinize the performance of the business over the last year or take an average of the past two years. For instance, if you earned £50,000 in one year and £100,000 the following year, your average income would be £75,000. The lender might utilize this average income for the affordability calculation, alongside the employed person’s income.
In the realm of Buy to Let mortgages, income and affordability assessments extend beyond personal earnings alone. Lenders also factor in the anticipated rental income from the property. The goal is for this rental income to comfortably exceed the mortgage payments, accommodating potential interest rate fluctuations in the future.
As such, personal income isn’t the sole focus, and being self-employed shouldn’t present a significant barrier. Many lenders are open to self-employed individuals, and some Buy to Let mortgages have no minimum income requirement, making them accessible to a wider range of borrowers.
It’s crucial to note that failing to maintain mortgage repayments could lead to repossession of your property. Additionally, it’s important to recognize that the Financial Conduct Authority does not oversee the majority of Buy to Let Mortgages.
Our team of dedicated advisers is here to assist you with the purchase or remortgaging of your home. We prioritize safeguarding your property and lifestyle while ensuring you find the most competitive deal tailored to your needs. With a focus on honesty and transparency, we aim to save you time and effort, providing guidance without any hidden fees. Feel free to reach out for an initial consultation, where we can discuss your options with no obligation. The financial conduct authority does not regulate some buy to let mortgages.
There are several nuances to consider, and the outcome can vary depending on the lender you engage with.
Whether you operate as a sole trader or manage a limited company, most lenders will require your personal tax calculations and computations. For sole traders, this demonstrates your business profit on an annual basis. For limited companies, it showcases your salary and dividends.
While some lenders focus on what you’ve drawn from the business, others assess the net profits. Opting for a lender that considers net profits could potentially increase your borrowing capacity. This approach acknowledges that not all profits are withdrawn monthly, thereby enhancing your borrowing potential.
Feel free to reach out for personalized guidance on navigating these intricacies.
The Financial Conduct Authority does not regulate some Buy to Let Mortgages.
Similarly, whether you’re employed or self-employed, the process of remortgaging doesn’t differ significantly. However, one aspect unique to businesses is the fluctuation in income.
Your mortgage may have been approved at a time when your business was more profitable. If your current income doesn’t match that, it could limit your remortgaging options, potentially leading you to consider a product transfer with your existing lender.
However, if your income remains consistent or has increased since your initial mortgage application, the process remains unchanged. We typically start exploring offers around six months before your mortgage term ends to avoid transitioning to a variable rate.
Feel free to reach out for personalized advice tailored to your situation.
The financial conduct authority does not regulate some buy to let mortgages.
Some lenders may exhibit more flexibility when lending to employed individuals compared to those who are self-employed. For instance, while they might lend up to 4.75 times the salary of an employed person, they might cap it at 4.5 times for self-employed individuals.
This underscores the importance of seeking advice tailored to your specific circumstances, as lending criteria can vary significantly between lenders. For example, if you’ve experienced a significant increase in profits in your most recent year, it’s advantageous to seek out lenders who consider only your latest year’s accounts. Similarly, if you’re a director of a limited company aiming to maximize borrowing potential, you’ll want to explore lenders who assess your net profits before tax as your income.
While lenders typically offer around 4.5 times your annual income, the definition of self-employed income varies widely among lenders. It could be based on your most recent year’s accounts, the average of your last two years’ accounts, or your net profit.
The standard requirements for all mortgage applications include providing your ID, proof of deposit, last three months’ bank statements, and copies of your credit report.
For self-employed individuals, lenders typically require the last two years’ tax computations and tax year overviews. If you’re a director of a limited company, they’ll also ask for the last two years’ company accounts as submitted to HMRC. These documents are essential to verify your income.
I prioritize transparency and ensuring my clients are well-prepared with the necessary documentation for their mortgage application process.
The key distinction lies in the assessment of your income over a longer period, emphasizing the sustainability and profitability of your business as a self-employed individual.
Preparation is paramount. Ensure you have all necessary documents ready upfront. It’s advisable to consult a mortgage adviser at the earliest opportunity. This allows us to discuss your income, borrowing potential, and any additional documents you may need to prepare in advance.
I’m committed to providing honest guidance and securing the best possible deal for my clients, without any hidden fees.
Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.
The information on this website is for use of residents of the United Kingdom only. No representations are made as to whether the information is applicable in any other country that may have access to it.
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