Mortgage arrangements can be complex at the best of times, but it appears the issue has been somewhat compounded by the pandemic. Unfortunately for some there has been a certain level of income instability due to reduced trade across the last year, and many have turned to Government support measures. While SEISS has offered vital aid to self-employed individuals, accepting this assistance could be disastrous for mortgage chances.
In 2021, research by Mortgage Broker Tools found 27 percent of self-employed mortgage loans were deemed unaffordable.
It also found the average maximum loan offered to self-employed mortgage applicants is £221,400 – a decrease of three percent from the last peak in August 2020.
But the situation has seemingly always been dire for self-employed individuals when it comes to securing a mortgage.
A 2018 survey by TotallyMoney also showed 80 percent of self-employed Britons have been rejected when applying for a mortgage.
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“Some lenders have reduced the amount of borrowing not just for self-employed people, but for all.
“Some lenders are asking for 25 percent deposits, some are asking for 20 percent, 15 percent or even accepting 10 percent deposits.
“Previously, you used to be able to borrow up to five times your income, but during the pandemic, this is now rare as lenders are usually giving 4.49 times salary or 4.75 times.”
However, for those self-employed people who do wish to apply for a mortgage, the support they have received does not have to mean the end of the road.
Instead, Mr Emin offered his top tips to help this group with their mortgage hopes.
Firstly, he highlighted, keeping up with commitments and payments is likely to be a good sign of financial management when applying for a mortgage.
In a similar vein, evidencing as much earned income as possible will help show financial stability.
Mr Emin stressed it was equally important to not pursue any Government grants – such as SEISS or Bounce Back Loans – a person did not absolutely need.
While the support can be useful, it is clear this could dampen the hopes of successfully securing a mortgage.
Finally, he warned keeping up to date with any tax owed is particularly important when pursuing a mortgage application.
For individuals who are struggling with a mortgage, taking action is often considered key.
This could mean consulting a mortgage broker or adviser to find out further information.
These experts are likely to be able to offer tailored and individualistic help to those who need it.
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