Self-Employed Clients – Give Yourself Ample Time To Apply
The stamp duty holiday is encouraging many people to consider buying property or moving home. If you are self-employed, there is no barrier to buying a home right now, and you might find the chance to significantly reduce the stamp duty you’d pay a great incentive.
While many mortgage lenders have reduced the options available to a range of clients, including self-employed professionals, there are still options available. If you are looking for guidance on what your options are in the current mortgage market, it is best to speak with a qualified and experienced professional.
Advice for self-employed people looking to arrange a mortgage
The below is an issue we have experienced over the years affects the self-employed, and it might be useful information for you.
From Monday the 5th of October 2020, anyone submitting an application should note that it is the 2020 tax calculations and overview that is required.
Previous years figures will be deemed out of date by most lenders, and therefore, will not be suitable for you to use when applying for a mortgage.
This issue is down to lenders not accepting self-employed figures that are more than 18 months old.
Not every business or organisation follows the same deadlines
We appreciate that self-employed people don’t need to prepare their latest returns to HRMC until the 31st of January of next year. However, these are separate bodies who follow separate rules, and the HMRC deadline is irrelevant if you are looking to arrange a mortgage with a lender.
This might sound annoying, but it is far better to be advised of this issue now, rather than filling in an application and then be told the supplied information is invalid.
We are always on hand to help, and here are some general notes for the self-employed when applying for a mortgage:
- If you operate as a sole trader or a company director with more than 25% of a limited company, you will be classed as self-employed
- Sole traders should use net profit as their income
Any limited company operators looking to verify their income to a mortgage lender should consider the following process.
With many lenders calculating borrowing potential by reviewing salary and dividends, your latest three years tax calculations will be of benefit. This is referred to as the SA302. You will also need the corresponding tax year overview.
At the time of creating this article, the relevant year overviews are 2017, 2018 and 2019. However, from Monday 5th October onwards, you will need to supply 2018, 2019 and 2020.
We appreciate this might be inconvenient, but if you want to enhance your chances of arranging a mortgage, it is important to provide lenders with appropriate information.
While there are new challenges to overcome in the housing market, people shouldn’t consider arranging a mortgage to be an impossible task. However, it is vital people accept help and assistance from professionals in the field. If you are keen to arrange a mortgage, speak to a mortgage broker or experienced adviser and make sure you are fully equipped to make an informed decision.