Recent research found that the most searched-for criteria by brokers was self-employed mortgages based on one year’s accounts, so what do you need to know about making the most of this opportunity?
There are two main scenarios when you might want to place a mortgage for a client based on one year’s of self-employed accounts.
The first scenario is an established business owner or sole trader whose income has significantly increased in the last year. As long as there is a reasonable explanation for this increase and why it would be sustainable, many lenders we work with will be able to base affordability on the latest year’s figures rather than an average, which is the approach taken by most high street lenders.
The other scenario is for someone who is newly self-employed and only has one year’s worth of accounts to demonstrate their income. We work with many lenders that are able to consider the recently self-employed and there is even one lender that can look at applications for clients with less than 12 months’ history of self-employment if they have moved to working for themselves in an industry within which they have an established track record.
The key for both scenarios is that the situation needs to make sense. We work with lenders that assess applications on a case by case basis, which means they can be flexible and take a view, but they will still want to ensure that your client’s income is sustainable, and the loan is responsible.
It’s possible to borrow up to 90% LTV based on income from one year’s accounts and it’s worth noting that there are lenders that can lend up to 85% LTV on this basis to borrowers with adverse credit or even in a DMP, so keep an open mind about the opportunities for your clients. As long as the story makes sense, there is a chance we will be able to place it.
Rates on mortgages for self-employed clients with one year’s accounts are also competitive and can start at 2.04% up to 65% LTV, or just 3.74% up to 90% LTV.
The top tip for brokers in placing this type of case is to remember that lenders will most probably review bank statements – either business or personal if it’s a sole trader – alongside an SA302. This can cause some problems for people who are paid cash in hand and don’t put their income through their bank statement even if they declare it on their SA302. Lenders will want to see evidence of money going in and out of the account.
So, if you have self-employed clients with only one year’s accounts, or even less, give us a call. If the case makes sense, we should be able to place the deal.
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READ MORE OF THIS MONTH’S EZINE CONTENT:
LATER LIFE LENDING
SECOND CHARGE MORTGAGES
SHORT TERM FINANCE
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