Yet, those who are self-employed can often struggle to access mortgage lending.
So what can brokers do to help these clients?
Specialist knowledge pays dividends
Although mainstream lenders are able to lend to self-employed workers, they may have more rigid criteria than other flexible specialist lenders, perhaps perceiving them to be a ‘riskier’ group with weaker job-security or insecure incomes.
In these circumstances a broker’s relationship with specialist lenders can be pivotal. Specialist lenders tend to be better placed to deal with self-employed or complex income cases as they will assess cases on their individual merits and provide a bespoke solution.
Preparation is key to good outcomes
Once a lender has been secured, brokers will want to guide their client through the approval process as quickly and as smoothly as possible. There are several steps that brokers should follow to present the best possible case to the lender;
1. Check your client is using a certified or chartered accountant. It might seem obvious, but lenders often won’t accept information from a bookkeeper so checking this early will save time later.
2. Lenders will often require the applicant’s tax calculations and corresponding tax year overviews if the HMRC SA302 forms are not available. Check with your client that they have these or that they can obtain them from their accountant before applying.
3. Check the lender’s thresholds. Some lenders will accept clients if they’ve been self-employed for only 12 months. Where the applicant has only been self employed for 12 months the accountant will generally need to provide a finalised set of accounts for the first year as well as a projection for the current year.
4. Should your client’s business have made a loss in the last few years or seen a reduction in net profits, an explanation will need to be provided to the lender. Whilst this doesn’t necessarily mean the client won’t be approved for the loan, they should get the opinion of their accountant prior to submitting the application.
Detail, detail, detail
Other points that a broker should consider include providing a company’s accounts as evidence of positive net worth. Having positive assets versus liabilities can be crucial in getting a loan approved and can work as a substitute to a salary history.
If your client is a fixed term contractor rather than fully self-employed then a lender will accept the contractor’s daily rate as a guide for salary, subject to meeting separate criteria.
The devil really is in the detail and making sure your client has all the necessary documentation prior to submitting the application will make a significant difference to the outcome.