Self-employed people are statistically more likely to be declined a mortgage than those who are traditionally employed. The vast majority of major banks and lenders impose additional restrictions on the self-employed that do not apply to those in conventional employment.

This does not mean it is impossible to qualify for a competitive mortgage while running your own business. Getting a good deal as a self-employed worker simply means approaching the right lenders and providing relevant evidence of your employment status and income.

Self-certification is no longer accepted

Previously, it was possible to self-certify your income as part of the mortgage application process. Where self-certification was an option, a lending decision could be reached based on the personal assurances of the applicant alone.

Today, lenders expect to see formal verification of income and financial status when considering applications from the self-employed.

This will typically mean providing:

• Certified accounts for at least two years
• Detailed evidence of earnings from HMRC
• Proof of your company’s track record
• Evidence of upcoming work or projects

This will need to be provided alongside all the usual documentation involved when applying for a mortgage, including but not limited to:

• Bank statements from at least the past six months
• Three months of utility bills
• Council tax bills
• Passports and/or driving licences
• Proof of current address and residency
• Maximum Loan Amounts for the Self-Employed

As a general rule of thumb, most mainstream banks will lend a maximum of 4.5 to 5 times the annual salary of the self-employed applicant. Though there is significant flexibility with maximum loan amounts depending on the lender in question and the financial circumstances of the applicant, In particular, offering a larger deposit can significantly increase the loan size available.

Getting a good deal as a self-employed worker

Mortgages for the self-employed can be extremely competitive, though they call for a strategic application process.

A few essential guidelines for self-employed mortgage applicants looking to get the best possible deal from a reputable lender are:

Apply via an established independent broker, who can conduct a whole market comparison on your behalf and find the perfect lender to suit your requirements. Taking your application directly to a lender is rarely the most cost-effective option.

Consult your credit score and note any discrepancies, as a history of credit issues could affect which lenders are willing to consider your application. If possible, take the time to address any issues with your credit that can be corrected before applying.

Hire an accountant to get your papers in order and to help you present a convincing case to prospective lenders. Accounts, statements, and paperwork prepared by a reputable accountant are always more authoritative when presented as part of an application.

Consider the alternative options to a conventional mortgage, which your broker will advise you on. For example, if you already have equity tied up in your current home or business property, a bridging loan could be a cost-effective option.

For more information on any of the above or to discuss any aspect of self-employed mortgages in more detail, book your obligation-free consultation with UK Property Finance today.

The return of the 95% LTV mortgage to the UK High Street came as welcome news for many thousands of first-time buyers. Ever since the financial crash almost 15 years ago, lenders have placed greater scrutiny than ever before on those they do business with.

Where an applicant is not clearly in a position to comfortably afford to repay a loan, rejection is guaranteed.

More recently, lenders have been urged to demonstrate greater flexibility where possible, both for the benefit of their applicants and for the wider economy, as the UK gradually climbs back to strength in the wake of the COVID-19 crisis.

With the 95% LTV mortgage back in business at a string of major lenders, it should be plain sailing for those unable to come up with a larger deposit.

What seems to be happening is actually quite the opposite; the idea of the 5% deposit mortgage is to enable more deserving and financially stable borrowers to get onto the property ladder. Instead, reports continue to emerge of mortgage applications being unfairly and immediately declined, despite the fact that the applicants in question can clearly afford a mortgage.

Excessive restrictions are enforced

Some brokers have said that despite the fact that 95% of LTV mortgages are government-approved, lenders are placing excessive and unfair restrictions on these loans. Unless the applicant in question has a 100% flawless credit score and is clearly sitting on a small fortune in personal wealth, they’re falling at the first hurdle.

And in doing so, I completely missed the idea of the government-backed 5% deposit mortgage initiative.

New-build properties are apparently completely out of contention for 95% LTV mortgages with the five biggest lenders in the UK. Even when people have held on to their jobs throughout the pandemic and built an outstanding track record financially, they are still being turned down routinely.

Experts believe it is simply a case of lenders attempting to cover themselves against what happened previously. Rather than assessing eligibility based on an applicant’s financial status today, they’re taking into account every possible scenario going forward.

A certain amount of due diligence in such regard is important, but the extent to which lenders are scrutinising applicants on the prospect that they might lose their jobs in the future is making the 95% LTV mortgage scheme considerably less accessible.

The importance of independent broker support

While such complications perpetuate, the importance of independent broker support will continue to grow. Brokers are gradually getting a feel for the 5% deposit mortgage landscape, along with the fact that lenders are actually taking 95% LTV loans seriously.

Taking an application directly to a major lender in the hopes of getting a mortgage with a 5% deposit is inadvisable.

To learn more about the government-backed mortgage scheme or to discuss your eligibility for a home loan in more detail, contact a member of the team at UK Property Finance today for an obligation-free consultation.

Interest in green mortgages is at an all-time high, according to new figures published by Mortgages for Business. A poll conducted on around 300 UK landlords found that 62% have an active interest in loans that incentivize borrowers to make energy-efficient improvements to their properties.

The figures contrast sharply with those of two decades ago when none of the landlords polled said that they were interested in eco-friendly mortgages for properties they purchased before the year 2000.

“Much of the UK’s housing stock is very energy inefficient, making our homes a major source of greenhouse gas emissions. Improving the energy efficiency of the UK’s stock of housing is a priority in the fight against climate change. A green mortgage means that, once they can confirm they have a revised energy rating for their property, the right lender will recalculate their mortgage rate at a discount,” commented Jeni Browne, director of Mortgages for Business.

“There are various mortgage products out there, but the best are applied upon completion of an energy efficiency project and for the lifetime of a mortgage. Given that housing accounts for such a significant chunk of the UK’s carbon emissions, it’s great that landlords are so interested in making greener choices. Spurred on, no doubt, by the fact that landlords are rushing to upgrade their properties to meet new EPC rating rules by 2028, Whatever the reasons, landlords now appear interested in joining the battle to combat climate change. That hasn’t always been the case.”

“We started trading in 1990, and the findings of our poll match our experience of the market over the last 30 years. Landlords’ attitudes have changed dramatically, particularly in the last decade. Landlords should be interested in these products, though; quite apart from the ethical considerations, green mortgages reward landlords with a lower rate when they shrink their carbon footprint.”

An unusual generational disparity

Traditionally, younger generations have been known to demonstrate greater interest in environmental issues and conservation than older demographics. In this instance, however, older landlords are more likely to seek green mortgages than younger BTL investors.

Specifically, Mortgages for Business found that, while 66% of landlords over the age of 45 were interested in green mortgages, only 50% of those in the younger age bracket were likely to apply for such loans.

Ms Browne stated that while the numbers are reassuring, major lenders need to do more to ensure greener options are available.

“Hopefully, our research will help drum up more lender supply,” Ms. Browne continued.

“The UK’s largest lenders have launched a wave of climate-change products amid criticism over their slow response to global warming.”

“For instance, one of the big lenders did launch a green mortgage last year, and we’ve seen others follow suit but have only offered borrowers preferential rates when they purchase an energy-efficient property, rather than rewarding those improving the ecological footprint of the UK’s housing stock.”

“It’s not enough, and that’s why they have failed to impress campaigners. Given Britain has just enjoyed the greenest Easter on record, with almost 80% of the energy used at lunchtime on Easter Sunday coming from zero-carbon sources such as solar and wind, the industry is in danger of falling behind the times unless we do our bit.”

The potential value of the services offered by brokers is being acknowledged by first-time buyers on a more widespread basis than ever before. That is according to the latest figures from Aldermore Bank, which indicate that one in every two first-time buyers is now using the services of an independent broker.

Specifically, the data published by Aldermore Bank suggests that 48% of first-time buyers were applying for mortgages with the help of a broker during March this year. One year earlier, just 18% of prospective first-time buyers said they were using the services of brokers.

In addition, a further 19% of those polled stated their intention to work with a broker at some point in the near future.

An impressive 98% of those who used the services of brokers to assist with the purchases of their first homes said that the service they received was useful.

Affordability checks and objective recommendations

Motivations for working with brokers were relatively consistent among those who took part in the survey. Aldermore Bank reported that 55% of first-time buyers contacted brokers for help finding affordable mortgages from recommended providers, while at the same time assessing affordability based on the applicant’s financial circumstances.

In addition, 54% stated that the brokers they worked with assisted with the application process and general paperwork, while 37% said they found out important information via their broker they were not previously aware of. 35% also stated that the broker they worked with recommended specific mortgages or other options, helping them make the right decision and subsequently take their first step on the property ladder.

In total, around one in three first-time buyers using brokers said it was invaluable to have an expert explain the property purchase process in clear and simple terms.

A lifeline for first-time buyers

Commenting on the findings, the head of mortgage distribution at Aldermore, Jon Cooper, said that independent brokers have been providing first-time buyers with particularly valuable help and advice in the current economic climate.

“Brokers have been a life raft for first-time buyers in a sea of increasing challenges and worsening conditions during the COVID-19 pandemic,” he said.

“Buying a property can be a very daunting experience, but brokers have been vital to first-time buyers for the past twelve months in assisting them to navigate through this period of uncertainty.”

“The much-needed expertise and guidance they have provided really shows how crucial the role of the broker is in today’s housing environment, and it’s very encouraging that their services have been found to be universally beneficial.”

Meanwhile, additional data published by Aldermore this month highlighted a significant increase in the number of rejected mortgage applications from first-time buyers over the course of the past 12 months.

In March 2021, more than 80% of first-time buyers said their application had been declined by at least one lender, significantly up from the 53% recorded during the same month last year.

The UK’s real estate market has bounced back from its COVID-19 crash at a pace none could have predicted. Fuelled by the temporary stamp duty holiday and the collective desire of millions to upgrade to more spacious rural properties, average house prices recently hit a record high of £238,831.

As a result, many people are finding themselves living in homes that are worth considerably more than at the time they purchased them. Consequently, equity release is becoming an increasingly attractive option among homeowners within the 55+ age bracket.

According to the latest figures from the Equity Release Council, total equity release activity during Q1 this year was up 7% from the same period in 2020. Collectively, homeowners released equity totalling £1.4 billion during the first three months of the year. But does this mean that now is the right time to release equity?

The impact of rising house prices

Eligibility for equity release is based on two things:

• The market value of your home
• How much of your mortgage have you repaid?

Consequently, homeowners with properties that have increased significantly in value could find themselves able to borrow more than would have previously been possible. This could therefore open the door to a wide variety of cost-effective borrowing options, which could be used for anything from home improvements to taking the holiday of a lifetime.

Is now a good time to consider an equity release?

Understandably, the option of releasing equity at an affordable price is an attractive option for many homeowners who lack extensive reserves of on-hand cash. But does the current economic climate make now the right time to consider equity release?

The answer depends entirely on the financial circumstances and long-term outlook of the applicant in question. The fact that average house prices are skyrocketing has no direct bearing on the affordability or otherwise of products like these for the average homeowner.

If you are in a comfortable financial position and can genuinely afford an equity release, then yes, now could be a great time to take action. At the same time, anyone considering equity release also needs to factor in the potential for property values to decrease over the coming years and decades.

Understanding the options available

Reaching a decision without the input of an experienced broker is inadvisable, as there may be significantly better deals on the market than those available from high-street banks.

Whether you are ready to go ahead with an equity release application or simply want to discuss your suitability in more detail, we can help. UK Property Finance offers 100% independent and obligation-free advice on all aspects of equity release, along with a full market comparison service to ensure our clients get the best possible deal.