Recent reports have criticised banks and lenders for limiting mortgage products that fit self-employed customers. It confirms what many people have long known – being self-employed has good and bad points, however a major con is the difficulty of securing a mortgage. But all is not lost for self-employed customers.
Mortgages for self-employed customers
The Mortgage Lender Show has released research that confirms what Which?, the consumer organisation, has been reporting for some time. Being self-employed is one of the 10 factors that could potentially ruin a customer’s chances of securing a mortgage.
The study was based on sole traders, contractors and people running businesses in London with fewer than 10 employees. The picture is likely to be the same nationwide, a factor that is backed up by the findings.
Over half a million self-employed customers said they felt discriminated against by mortgage lenders. People also said they would live in another property if they were paid the same and employed; they felt they had to make different choices due to their self-employed status.
Another difficulty that was highlighted for self-employed mortgage customers was supplying the information that mortgage lenders asked for. Over half of customers said they found this a struggle.
The backbone of the UK economy
The difficulties of mortgages for self-employed customers highlighted is a stark contrast to how self-employed people are often described. People who start and run their own business – as well as hire a small number of employees – are said to act as the ‘backbone of the economy’.
In recent years, more people have taken the plunge, turning their entrepreneurial skills to starting a small business. Since 2000, @simplybusiness say that there has been a rapid rise in self-employment but the lenders and banks don’t seem to have kept pace with the change. In 2018, there were 4.8 million self-employed people in the UK, a rise of over 1 million from the previous year.
There are many reasons why mortgages are refused and knowing what these are means you can improve your chances of a successful mortgage application. Which? lists the top 10 reasons with self-employment being at number seven with outstanding debt being in the top spot. A bad credit score ranks second, followed by no credit history, not being on the electoral register and buying a ‘non-standard’ property.
Attempting to borrow more than the customer can afford was also a prime reason for a mortgage refusal, along with lifestyle changes such as divorce or starting a family. Mistakes on the application form loomed large as a reason for refusal.
Successfully applying for a mortgage
Whether you are self-employed or not, the team at Perception Finance can help in all aspects of successfully applying for a mortgage. From advice on how to reduce issues which may adversely affect your mortgage application process to finding the right product for you, we can help. Contact the mortgage team today to arrange a consultation.
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Written by: Cambridge Web Marketing