Over the past few years, the number of self-employed workers in the UK has gone up dramatically. According to @ONS, “The number of self-employed increased from 3.3 million people (12.0% of the labour force) in 2001 to 4.8 million (15.1% of the labour force) in 2017.”
As a result, the number of self-employed people applying for mortgages has also shot up. And although getting a mortgage as a self-employed earner is far from impossible, those working for themselves still feel like they’re not treated fairly when it comes to taking out a loan for a home.
Whether or not this is true, it may well have an impact on the number of self-employed people applying for loans and therefore the number getting onto the property ladder. In some cases, fear of discrimination may well put the self-employed off applying for a mortgage altogether.
Are the self-employed discriminated against when applying for loans?
According to research from UK Finance, 71% of self-employed people feel discriminated against by mortgage providers. Even though self-employed people now make up a significant percentage of the workforce, almost half still find the task of collecting the required documents to be an onerous one.
Not only do self-employed people often find it a challenge to secure a mortgage, many feel like they have less choice when it comes to buying their dream home. Over a quarter of self-employed people believe they would live in a different property if they weren’t their own boss. This means that a staggering one in four self-employed workers in the UK are settling for mediocre properties just because they have a non-standard income.
The main difference between applying for a loan as an employee and applying for a loan as a self-employed worker is time. If you’re employed by a company, you can apply for a mortgage at any point. Although most lenders prefer applicants to have been in their current role for at least three to six months, you can begin looking for mortgages as soon as you have your contract.
If you’re self-employed however, you’ll need to wait a little longer. Most lenders ask self-employed applicants to supply two to three years of accounts. This means that those starting their own business have to wait significantly longer before buying a new home.
If you’ve been self-employed for more than three years, getting a mortgage as a self-employed person should be relatively straightforward. Before applying for your loan, try to get organised. Get your accounts in order and make a folder of all important and relevant paperwork, so you have all the information you need at you fingertips. If you’re not sure which documents you need, ask a mortgage advisor for help getting your paperwork together.
Find out more about applying for a mortgage and the products available to self-employed applicants, by getting in touch with an expert member of our team.
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Written by: Cambridge Web Marketing