A few days ago I wrote a post discussing my thoughts about renting a home rather than purchasing one, and in particular how I have enjoyed the reduced pressure of not having to worry about constantly paying out to maintain or replace the big things in the home. I’m thinking things like the boiler, central heating or electrics if they breakdown or need upgrading!
As a mum of two boys, I know first-hand what it feels like to have to juggle running a family whilst also maintaining a family budget. Whilst home ownership may not be for me right now – who knows about the future, though – I do know that it might not be as easy as jumping on the ladder again as and when we want to. This is because both my husband and I are self employed and it seems to be becoming more and more difficult for self employed people to get on the property ladder these days. I was looking the other day at some recent research into self employed mortgages which showed that 2 in 5 self employed people who have a mortgage, or who are planning to get one, are worried about obtaining mortgage finance. In fact 77% of those responding to the survey said that they feel concerned about being able to shop around due to the limited choice of mortgage lenders who were even offering self employed mortgages. When I buy anything at all in life, I always look to shop around to find the best deal available. So to hear that there is such a lack of choice and competition available to those who are looking for a self employed mortgage to buy a home (often the largest purchase any of us make in our lives) is concerning to say the least.
I did some more digging around, and it seems that whilst some lenders may be deterred from offering self employed mortgages, there are still lenders out there who are willing to offer these kinds of mortgages and in fact, some even specialise in looking after the needs of those people who are in need of and who are looking for a self employed mortgage. While not all lenders are offering them, there are quite a few available which makes shopping around possible. You may think that you’d have more success trying to get a self employed mortgage through a larger lender as they have more available money to lend, but often this is not the case as bigger lenders can find it harder to assess the documentation required to prove affordability for self employed mortgages because they use automated processes and computer models to make their lending decisions. Often this documentation can include projections on business performance and decisions about the sustainability and income level of a business in the future. These models don’t tend to look too deeply into the nitty-gritty of a business however and this often leads to a mortgage getting kicked out on a technicality in the criteria, when really there should have been no problem making the loan. These decisions require an aspect of subjectivity and experience in their review.
It’s often smaller lenders who specialise in looking after the needs of those wanting a self employed mortgage. These generally include regional building societies or specialist banks. They use human beings to make their lending decisions and are therefore better placed to review more complex information to help them make their lending decisions.
So if you currently work for yourself and like me you are in no rush to buy a home but would like to at some point in the future, it’s well worth taking a little time now to learn about the ins and outs of self employed mortgages to give yourself a better chance of getting approved when you eventually do decide to make the leap.