There are many benefits to owning and running your own business but getting a mortgage in the current financial climate isn’t necessarily one of them.
Your monthly salary may be low, you might be self-employed or you might be keen to buy a home that has an unusual feature such as a thatched roof. All these and more have been enough for lenders to reject mortgage applications. We spoke to a specialist Chelmsford mortgage broker about what you need to know about how to stay special and still buy your dream property.
Why are you treated differently?
When mortgage lenders assess whether or not to accept your mortgage application, they take a number of factors into account. One of the most important is how likely you are to be able to afford to meet your mortgage repayments, i.e. how much of a risk you are.
To help them decide, lenders will look at how much you earn. If you are employed in regular job, with regular hours it is relatively easy for them to assess how much money you have coming in each week. However, you may have difficulty proving your income if you are self-employed, or an SME business owner, as again your income will fluctuate and isn’t guaranteed, or you may take a low monthly salary and pay dividends.
Lenders may also be reluctant to lend to you if you intend to buy a property such as a prefab or a listed building, that is unusual in some way. This could be because they are concerned about the resale value should they have to repossess the property, or they may wonder whether you will be able to afford the ongoing costs of a high-maintenance property, for example a thatched cottage.
What can you do?
If you are a business owner or self-employed there are some steps you can take to improve your chances of finding a mortgage. You can make sure that your books are accurate and up to date, get them signed off by an accountant, and ensure that any attempt to be ‘tax efficient’ doesn’t suggest that your income is too low to afford mortgage repayments.
However, while it’s tempting to believe that you can do everything yourself online, and many people successfully find and apply for mortgages this way, if your circumstances are unusual you could benefit from taking specialist mortgage advice.
How could a specialist broker help?
Specialist mortgage brokers have access to a vast array of different mortgage deals. Whole-of-market brokers can access mortgages from masses of different lenders, as they aren’t tied to a specific bank or building society, and frequently offer ‘broker-only’ deals that you won’t find independently.
Specialist brokers understand not only that different lenders have different criteria from each other, but also that these criteria change over time. This real time knowledge makes them invaluable to anyone looking for anything more than a standard mortgage. Matching your circumstances to a lender’s current criteria maximises your chances of success.
There may be lenders, for example, who won’t consider lending money for the purchase of a property with any signs of Japanese knotweed, while others may consider applications if a treatment plan is in place.
Most lenders treat small and medium sized business owners as self-employed, and many require self-employed applicants to provide 3 years of accounts, but there are some who will accept fewer. Carrying out due diligence and knowing what lenders accept differing circumstances, to get you the best deal, is what sets specialist mortgage brokers apart and could make the difference between having a mortgage application rejected or not.
So, if you need a mortgage or remortage to beat the increasing UK mortgage rates, don’t delay, talk to a specialist broker.
