The number of self-employed in the UK has increased dramatically in recent years growing from 12% of the workforce in 2008 to 16% in 2016. At the same time, it has become more difficult for self-employed workers with complex incomes to get a mortgage, to the point where the self-employed believe they cannot get a mortgage.
HIGHER LOAN TO VALUES AND IMPROVED AFFORDABILITY ASSESSMENTS
At Brightstar, we are seeing some positive changes. In recent months, existing lenders are reviewing criteria and have recognised that there is a gap with regards to the self-employed. Alternatively, new lenders are coming on board and have already taken this in to consideration when devising products.
Criteria is shifting. Lenders on panels are now considering up to 85% LTV with on only one year of trading income. They may require a projection of future income but lenders are willing to consider deals if the income is similar or more. Lenders are also becoming more tolerant of the niceties of self-employed workers. For example, it is now acknowledged that the first year of trading may result in a small loss or lower profits and this is taken into account when calculating affordability.
It is also becoming increasingly common that the minimum length of trading is 12 months instead of the usual 36 months.
COMPLEX INCOMES AND LENDING INTO RETIREMENT
More lenders, such as Saffron Building Society will allow more income to be used in calculations too such as allowing net profit after tax, plus salary.
Another example is Kensington who will also consider using net profits if the client is 100% shareholder of the limited company, subject to confirmation from the accountant that the net profits are not being held for anything else.
More lenders are looking at more complex incomes including contractor incomes, investment income, pension income as well as lending to age 85. As people live longer and retire later, it is another area of the market that needs to respond to changing demographics.
Opportunities exist for the self-employed, even with those who have additional complex requirements. My team and I are always happy to chat through your case to see if we have a solution available for your client.