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Starting your own business, being a freelancer, or working on a contract basis can be immensely rewarding. It offers flexibility and the potential for high earnings. But when it comes to securing a mortgage, such unconventional employment status might raise some eyebrows.
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Understanding Your Situation
If you’ve only got one year’s accounts, you may feel like homeownership is a distant dream. Don’t worry – there’s hope. Mortgage providers typically look for a stable income stream and the ability to maintain the mortgage repayments. This doesn’t rule out non-traditional earners, but it might mean you have to work harder to demonstrate your financial stability. There are lenders that can consider shorter trading periods, for example, one year of accounts.
Preparing for the Mortgage Application
Before you start your application, there are a few things to keep in mind:
Your credit score plays a pivotal role in any mortgage application. Platforms such as Experian, Transunion, Equifax, and Check My File can help you understand your current credit standing. Check My File offers a free trial. It’s worth monitoring your credit score and taking steps to improve it if necessary. You can use free tools available on these platforms or advice from Citizens Advice or the Money Helper to guide you.
Financial Conduct Authority (FCA) Regulated Lenders
Ensure that your mortgage provider is regulated by the Financial Conduct Authority. This offers protection and means that the lender adheres to the guidelines set out by the FCA. This is particularly relevant for those with unconventional income streams, as FCA-regulated lenders are required to conduct thorough affordability checks.
A mortgage is likely to be one of the most significant financial commitments you’ll make in your lifetime. It’s crucial to seek advice from trusted professionals. Websites such as Zoopla, Trust Pilot, and The Financial Times can provide useful information. You could also consult with mortgage advisors who specialize in helping individuals in your situation.
How to Increase Your Chances
So how can you enhance your chances of getting a mortgage approval with one year’s accounts? Here are a few steps:
Create a Strong Business Case
You need to demonstrate that your business is profitable and that your income is likely to be sustained or increase in the future. Presenting a business case to your lender can be a powerful tool. This might include future contracts, testimonials, or a strong business plan.
Show Evidence of Regular Work
If you’re a contractor, evidence of regular contracts can be beneficial. It helps to demonstrate that your work is steady, and there’s demand for your services.
Save for a Larger Deposit
The larger your deposit, the less risk the mortgage provider takes on. As a result, you may find more lenders willing to consider your application if you have a substantial deposit.
Consider a Joint Application
Applying for a mortgage with a partner or a family member who has a more conventional income may increase your chances of approval.
Use a Mortgage Broker
A mortgage broker can guide you through the process and help you find a lender that is more likely to accept your application. They have an in-depth knowledge of the mortgage market and can identify lenders who are comfortable with your employment status.
If mainstream lenders are unwilling to offer a mortgage, don’t be disheartened. There are many specialist lenders who cater to the self-employed or those with unconventional income streams. These lenders understand the nuances and challenges of such income types, and they may be more flexible with their lending criteria. However, remember to thoroughly review the terms and conditions, as the rates and fees may be higher than traditional lenders.
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Being a business owner, freelancer, or contractor doesn’t mean that you can’t secure a mortgage. It might be more challenging, and the process may be a little more involved, but with the right preparation and advice, you can navigate the mortgage market successfully. One year of accounts gives you access to less lenders than if you had two or three years. There are still lenders that can consider these applications though.
Remember, there’s a wealth of information and assistance available. From professional mortgage advisors and specialist lenders, there are multiple paths to help you achieve your dream of homeownership. Keep in mind that every borrower’s situation is unique, so take the time to research, plan and seek the right advice for your circumstances.