09 Mar Mortgages for the Self-Employed
There are many benefits to being a self-employed coach – freedom to work where you want, ability to claim expenses, flexibility in the hours worked – but one issue we get asked about by coaches that causes them problems is getting a mortgage.
If you are an employee, all you will need is two or three payslips and a copy of your contract of employment. The self-employed will find it harder to get a mortgage and the interest rate charged may be higher than that for an employed person.
What You Will Need
Lenders will generally want to see at least two years worth of certified accounts, i.e. accounts that have been agreed and approved by a qualified accountant. Some lenders will also insist that the accountant is certified or chartered, which will usually mean a more expensive accountant.
Many coaches produce their end of year accounts (the figures they put in their self-assessment) themselves so this lack of certified accounts will make it more difficult to get a mortgage. A self-employed person can print off a tax calculation (known as an ‘SA302’ by HMRC) that displays their HMRC submitted income and expenditure details for a given tax year and some lenders may accept this as proof of income.
A good credit record and a sizeable deposit will also be required by the lender and it will also be beneficial if the coach can provide a copy of their contract with their club to demonstrate they have regular work.
It is worth noting that lenders will loan based on the amount of profit made, not the income generated – the more profit you make, the larger the potential mortgage amount offered will be. Many self-employed workers minimise the amount of profit made so that they don’t have to pay so much tax but this will mean that the size of mortgage offered will be adversely affected.
All Is Not Lost
If you are struggling to produce the required criteria, we recommend a visit to a local mortgage broker who may be able to find a lender willing to relax some of the requirements, e.g. accept a year’s accounts rather than two. You are almost certainly going to be required to produce a bigger deposit if you can’t meet the standard criteria and are likely to be charged a higher interest rate.
If you run your business as a limited company, and own more than 10% of the shares in said company, you are likely to be required to provide the same criteria as for the self-employed person. One other issue for a company shareholder will be that some lenders will not consider dividends when calculating the shareholder’s income.
Contact us if you need further clarification or visit our support centre for further free expert online advice and support.