Mortgage lending juggernaut Santander have today announced that from the 11th of April they will be introducing new self-employed mortgage income requirements. We all know that when it comes to self-employed income, it is never a straightforward affair. Salaries, dividends, and net profits can change regularly depending on what type of tax advice you receive from your accountant. This has historically made it more and more tricky to get the borrowing you need when applying for a mortgage compared to PAYE employed individuals.
What do you usually need for a self-employed mortgage?
Generally, when applying for a mortgage, the self-employed income requirements are as follows:
- 3 years tax overview and tax calculations if you are a sole trader.
- 3 years fully audited company accounts showing salary, dividends and, net profits if you are a shareholding company director.
- 3 months business and personal bank statements.
What issues could this cause?
Although not a huge list of requirements, getting these documents together could be problematic in mortgage applications for various reasons. For one, getting your full accounts drawn up and submitted can sometimes be a length process.
A process that could hold up your mortgage application if it is not done in time. The same goes for getting your tax calculations and overviews from HMRC. Another issue could rear its head if a lender calculates your income based on a 3-year average.
Say your 1st year of trading was quite low because you were building the business and investing your money back into it.
But your 2nd and 3rd year were much better, your overall average income figure would be affected by the lower trading of the first year.
So what changes are Santander making to self-employed mortgage income requirements?
In a statement released today, Santander have announced the following:
“From the 11th of April we’ll now be taking an average of the last two years’ income figures, or the latest year if this is lower. For existing Santander mortgage customers moving home, underwriters may be able to utilise a more individual assessment.
We’re still limiting applications where any applicant is self-employed to 75% LTV (excluding existing Santander mortgage customers moving home).
We’re also simplifying the income evidence requirements, primarily through an updated accountant’s certificate, which went live on 30 March. Applicants providing the updated accountant’s certificate will no longer need to provide business bank statements.
If you are a limited company director, we will only need an accountant’s certificate confirming your income.
If you are a sole trader, we will either need an accountant’s certificate confirming your income or if you don’t have an accountant, we will need 2 years tax calculations and overviews and your latest business bank statement (dated in the last 30 days).”
What do the experts say about Santander self employed income requirments?
Louis Mason, content manager at Oportfolio Mortgages in London has this to say about the changes:
“The part of this announcement that really stands out to me is the simplification of the self-employed mortgage income requirements. By making their only real requirement the accountant’s certificate, Santander have made the whole process a lot easier for both applicants and mortgage brokers. By removing the mandatory need for full accounts, bank statements, and tax documents, the whole application process will be much smoother and less stressful for everyone involved. We at Oportfolio think there still needs to be some work on the loan to value limitations that are still left over from the COVID-19 apprehensions but they are moving in the right direction.”
If you or someone you know is self-employed and want to know more about self-employed mortgage income requirements, please feel free to give our friendly team a call.