Working on your own comes with huge benefits. Being able to follow your own schedule and work whenever you want to is a dream for many people. Not having a boss to report to and earning proportionally to the work you put in are attractive reasons to consider working as a freelancer. If you intend to loan money to buy a home you can opt for self employed mortgages. These mortgages are specifically designed for people who are self-employed, like freelancers. You could also apply for moving home mortgages if you already have a mortgage.
Income Is One of The Most Important Aspects for Mortgages
One of the important aspects when applying for self employed mortgages is the proof of income. As a self-employed person, you don’t have a regular salary to make this an easy process. You must ensure that you have at least six to twelve months of bills and bank statements for the lender to get a full picture of what you’ve earned. With the new financial situation, some lenders can even require your financial statements from the last two years.
Moving home mortgages come with similar requirements to self employed mortgages. Your income is still a deciding factor in whether or not your lender will accept your application. Another thing to consider is that while your personal circumstances might not have changed, your lender’s criteria could have. It is best to let your broker handle the discussions with your lender because they are more likely to get a reasonable deal for you.
Affordability Requirements for Mortgages
Once you have proven your income, mortgage lenders will conduct an affordability check. Since your income is more likely to fluctuate, this can be a tricky calculation. Where appropriate, for most people applying for both self employed and moving home mortgages, the daily rate is taken and multiplied by the number of days they work every week and then multiplied again by 48 (the approximate weeks worked per year). Typically, a lender will offer you four times that amount as a mortgage number. However, depending on the lender, this can sometimes increase to five or six times that amount.
In other cases, your net profit may be considered as your daily rate where that is more appropriate. It’s important to consider this upfront when paying your taxes if you think you may want to apply for a mortgage within the next three years, as having a low net income will negatively impact your borrowing. An expert mortgage broker can assess your income and offer you advice about different mortgage deals you can apply to, based on your net income. Certain lenders are known to require higher incomes and you can avoid wasting time by working directly with a broker that can guide you to the appropriate lenders when applying for housing loans.
How Much Deposit Do You Need for Self Employed Mortgages
If you opt for self employed mortgages, you may have accumulated a significant amount of savings from your time as a freelancer, or from your time as an employee, or even from an inheritance. Being able to use this on your deposit will also change the amount you can borrow and the interest available to you. Being able to come up with a larger deposit means you will need to borrow less in relation to the purchase price of the property you wish to buy, which may mean you can qualify for better interest.
Moving Home Mortgages Can Come with Early Repayment Charges
ERCs or early repayment chargers can make a new mortgage deal less appealing. You need to make sure that the new deal you’re getting won’t hurt your long-term finances. If you’ve already built equity in your home you are most likely to get better interest rates and reduce monthly repayments. When you apply for moving home mortgages you first need to check if there are any penalties to be paid on your old mortgage.
A mortgage broker can analyze your mortgage and offer you valuable information concerning penalties you might have incurred if you are still in the benefit phase of your current mortgage. A broker can also run calculations and provide a full assessment of how much overall cost you will have in the long term.
Applying For a Mortgage with The Help of a Broker
As lenders often do not understand the full extent of self-employment income, it is advisable to hire a specialist mortgage broker who can find the best deal for you as they can explain the situation more clearly to lenders, and can also advise you on what type of information you need to provide for your specific situation. A mortgage broker will walk you through the process, answering any questions and handling the paperwork for you. Certain lenders will only consider offering money to people represented by mortgage brokers.
Most probably you have to pay a brokerage fee for this service, but it’s worth considering if you don’t want to handle income calculations or work experience information as they will guide you through the process and answer any questions you may have with lenders as well as doing everything on your behalf. Both self employed and moving home mortgages are decided on your application, and having an expert handle it on your behalf will greatly increase your chances of getting a good deal.
Freelancers who want to apply for a mortgage should not be discouraged by the fact that their application process will be different than most people’s. Eligibility criteria are all that matters when you apply for a mortgage and if you fulfill the requirements you will most likely get the money. However, the most important thing when applying for self employed mortgages and moving home mortgages is working with an expert broker. By having your application analyzed and optimized, your chances will increase. You will also get access to better deals if you work with a mortgage broker. Furthermore, you will not have to go through the stress of handling the paperwork yourself and you will benefit from knowing exactly what to expect when applying for a new mortgage.
