‘Mortgage pain’ felt by most self-employed
Nearly three quarters of the UK’s self-employed population believe their employment status makes it harder to get a mortgage, a new study has found.
May 15, 2019
Earlier this year we read of how the majority of mortgage lenders believed the market for borrowers who don’t fit normal lending criteria would grow by at least £1 billion in the next 12 months. A third of brokers believed the biggest opportunity was the growing number of self-employed workers wanting to buy homes.
And it’s no surprise when you consider that 4.85 million people are currently self employed and the number is expected to rise to 5.5 million by 2022.
Despite this, almost three-quarters of self-employed Brits believe their employment status makes it harder for them to get a mortgage, according to new research released today from online mortgage broker Trussle.
Self-employed people jump more hoops
Those wanting to take out a self-employed mortgage typically have to jump through extra hoops to get one. Compared to salaried employees they have to, for example:
- Provide two to three years worth of accounts and additional documents e.g. SA302 Tax Year Overviews
- Have their affordability assessed on the past two to three years of earnings – rather than their current income.
- Prove a stable work history with no gaps in employment over the last two to three years.
Longer waits, added cost and confusion
According to Trussle’s research, sourcing these additional documents was tricky for a third of self employed borrowers.
Not surprisingly, as a result many self-employed people face longer application and approval times. And many also faced extra costs to source the documents required.
While two fifths found the experience of getting a mortgage difficult because of poor guidance from lenders and a lack of clarity over what additional documents are needed.
If you’re self employed and worried about your prospects of getting a mortgage, get fee-free expert mortgage advice today from our partners at London and Country. You can start your search online or speak to them today.
Delaying becoming a parent
If you’re pregnant and self-employed, there are even more potential pitfalls, the study found.
More than half of those self-employed homeowners and would-be borrowers who felt overlooked or penalised due to being pregnant, believe they were treated differently during the mortgage application process.
While nearly one in five self-employed borrowers aged 25 – 34 admitted they put family plans on hold to focus on trying to get on the property ladder.
Wake up – this is 2019
Trussle have responded to their research findings by suggesting a range of ideas including integrating Open Banking to help those with multiple income streams and assessing self-employed mortgage applicants on their current income. The broker has also announced its intent to design innovative mortgage products to help the self-employed.
The HomeOwners Alliance couldn’t agree more. Chief Executive Paula Higgins says: “The mortgage industry and government need to wake up to the world in 2019 and do more to support the self-employed into homeownership.
“Gone are the days for many where you have a job for life with one company,” she adds. “Many of the hurdles the self employed are facing are time-consuming, bureaucratic and unfair. The industry should treat all applicants fairly and deliver a top notch service to the self-employed sector which will continue to grow.”
In the meantime – get fee-free expert advice
If you’re self-employed and looking for a mortgage, don’t panic as there is fee-free expert mortgage advice out there. Speaking to a broker about your options could save you time and money.
One key benefit is that brokers already know what lenders are more likely to lend to the self-employed. Look for a broker who is whole of market, or has access to wide number of lenders.
However, if you want to go directly to a lender, make sure you get details of the deals and any fees. It’s also essential to shop around as lenders’ attitudes to the self-employed vary. For example, some may require a bigger deposit than others, while others will not offer such a competitive rate.
If you are accepted, you should be offered the full product range, including fixed, variable rate and tracker mortgages. Not sure what these are? Then have a read of our simple advice guide on the different types of mortgages here