In this edition of advisor insights, senior mortgage and protection advisor at Oportfolio Mortgages Jade Pinkerton shares her thoughts about why self-employed people need mortgage advice now more than ever. Jade and the Oportfolio team attended the PRIMIS mortgage network conference at the Telford International centre last week. At the conference, they took part in Kensington mortgage’s breakout session where Kensington discussed many things, including self-employed borrowers.
Jade Discusses Why Self-Employed Mortgage Borrowers Need Mortgage Advice
Myself and the Oportfolio team gained a lot from sitting in on Kensington’s talk at the PRIMIS conference this month, mostly about the different generations of people and how brokers interact with baby boomers, Gen-z and Gen-x people. However, one of the most interesting parts of the talk and frankly most shocking was Kensington’s facts around self-employed mortgage borrowers. They said that 36% of self-employed people try to get a mortgage, and then simply give up after their first attempt if they aren’t immediately successful.
This statistic absolutely blows my mind as this means that a huge number of self-employed people are going about unable to get a mortgage and assuming that they never will be able to! There are many reasons why a self-employed mortgage application might be rejected and they often vary from lender to lender. For example, one lender might accept 1 whole year’s self-employed income figures while another might only accept a minimum of 3 whole years trading. For someone trying to get a mortgage with 1 year’s figures from the latter of the two banks, they would be immediately rejected. For them to then completely give up their search for a mortgage is silly!
66% Of Self-Employed People Consider Going Employed To Get A Mortgage
Another shocking statistic that Kensington provided is that a whopping 66% of self-employed people have actually thought about going from self-employed to employed to try and help them get a mortgage. There are many reasons why people decided to become self employed. Often self-employed professionals have the ability to earn much more than they would being employed, there can be much more flexibility in your work as your own boss, and the freedom of being your own boss and making your own work decisions can all be very appealing. For someone trying to get a mortgage, it is understandable why switching to employed might sound like a good idea, but in reality it could hinder your mortgage options even more.
Firstly, your income could go down, as we have mentioned already. Secondly most mortgage lenders will need you to be employed in a position for a minimum of 3 months, so if you go from self-employed to employed you might need to wait multiple months before getting approved for a loan. Thirdly, if you accept any work contract other than a permanent full time role with no probation period, such as a fixed term contract or a job with a 3 – 6 month probation, mortgage lenders will likely need you to have a more stable employment before they will lend to you (i.e. a permanent position established or 1 year’s history of working fixed contracts).
What Can I Do If I Have Been Rejected For A Self-Employed Mortgages
Self-employed people need mortgage advice more than ever now, and if you haven’t used an advisor before, now is the time to use one. Of course most self-employed people are aware that they will generally need 2 or 3 years accounts before the lender will use the self-employed income towards the mortgage assessment. But as I have already mentioned, it is actually possible with some lenders to get a mortgage based on one years income! Knowing this, and where to place a mortgage application, has helped many of our clients get their first home sooner than they hoped or refinance an existing property earlier.
In 2022 70% of people used a mortgage broker to help them get a mortgage. We get a lot of clients who have tried to start the process themselves and then struggled to deal with the banks being awkward, asking for too much information, not getting the result they hoped for, and having to deal with call centres and long assessment times. We can make the process as smooth as possible for clients, and will navigate the lenders and filter the questions so that we do as much of the work as possible. We will also use our relationships with the lenders to push things through swiftly, and our knowledge of the banks assessments and criteria to get the best result possible.
If that many people needed a broker in 2022 then I would suggest that an even higher percentage need a mortgage adviser now – especially while rates, lending criteria, affordability assessments and stress tests are change all the time.
If you or anyone you know is self-employed and are struggling to get a mortgage or just needs to speak to a professional mortgage advisor, feel free to give our team a call today. We are here to help.