Help to buy Self employed Mortgages
Getting a help to buy self-employed Mortgage as a self-employed borrower is substantially different from getting one as a mortgage applicant with an employer. It is very possible but you will have to meet the eligibility requirement for the help to buy scheme and satisfy a mortgage lender of your affordability as a help to buy self-employed mortgage applicant.
This is because Mortgage Lenders see self-employed borrowers as much riskier and the process of assessing their creditworthiness is much harder and so requires much more documents and checks.
This is the same if you are on a contract or working overseas.
It is important to note that your self employed nature does not affect your eligibility for the help to buy scheme but may make it much harder to actually get a help to buy mortgage from a mortgage lender due to the affordability assessments they will need to carry out.
Help to buy self-employed eligibility:
To be eligible for the help to buy scheme you will need to meet the eligibility requirements as everyone else and nothing more.
For the help to buy equity loan they are:
- You need a minimum of 5% for your mortgage deposit
- You cannot purchase a buy to let property
- You cannot rent out any part of the help to buy property
- Your property cannot be more than £600,000
- You must be a first-time buyer or a home mover with no other property in the world.
- You cannot have any overdue payments on any loans, any county court judgments (CCJs) against you for more than £500 nor can you have a bankruptcy on your credit file within the last 3 years.
- You can only use a standard repayment mortgage, you won’t be able to use any unique type of mortgage such as a guarantor mortgage or offset mortgage.
- You cannot use any other Government schemes with your help to buy scheme aside from a help to buy ISA.
- To have an annual maximum household income of £80,000 outside London & £90,000 in London
- A monthly income which is at least 65% more than the monthly cost of the shared ownership property you intend to purchase. This, of course, depends on the price of the property and how much you want to purchase(which will directly affect the rent you pay).
- A 5% mortgage deposit is usually a good guide
- You should not be able to afford the home on the open market
- You should have at least £4,000 to cover the costs of the mortgage and transaction. This is a guide.
- You should have a good credit file without any CCJ, recent credit defaults, IVA or bankruptcy order.
- You should be a first-time buyer but if you do own a home you should be in the process of selling it and would need to have sold it before you will be eligible for a new shared ownership property.
Is it hard to get a help to buy self employed mortgage?
With the above in mind, Mortgage lenders will view help to buy self employed mortgage applicants as much riskier.
You will need to ensure you have a suitable help to buy mortgage broker to assist you in getting the right help to buy mortgage with a suitable help to buy mortgage lender.
Lenders find self employed borrowers more risky due to the fact that the income stream might not necessarily be stable or constant over a long period of time.
If you are newly self-employed with little history of trading or no revenue then getting a mortgage or specifically a help to buy mortgage could be incredibly hard and you might find the process a waste of time.
However, if you have a partner then who has a paid job and can show regular incomings from their job then it is best to gift your savings to them and for them to apply solely for the Mortgage whilst you ensure the Lender lists you as a party on the Mortgage deed.
This can only be done if she is eligible for the help to buy scheme as well (considering you still want to use the help to buy scheme).
What will you need for a help to buy self employed mortgage?
To make the process of getting a Mortgage easier you will need to start compiling certain documents months in advance.
This documents will help prove to the help to buy mortgage lender that you can maintain the Mortgage payments over a sustained period of time.
They will also prove to the helpt o buy mortgage lender that as a help to buy self-employed applicant you can handle the potential help to buy equity loan repayments.
Mortgage Lenders will typically want to see your income over 1-3 years and this will be assessed differently based on if you are a sole trader, partnerships or a contractor.
**If you are a sole trader: **
The Mortgage lender will consider the profits of your business
**For a partnership: **
The Mortgage lender will look at your share of retained profits and any draws.
**If you are a director of a limited company: **
The Mortgage lender will look at your salary, dividends and some Mortgage lenders will look at the retained net profit of the(or your) business.
**If you are a contractor: **
Some Mortgage Lenders will consider your daily pay and consistency of work.
Mortgage lenders have become more familiar with contractors and some Mortgage lenders now have a laid out criteria for contractors.
This is especially true for It contractors where Lenders usually favour contractors:
- Who have got a long time left on their contract with
- who have a long history with the same employer
- Who have a history of renewals with the employer
- whoa can get a written confirmation of their employers intention to extend the contract
- You have been working within the same industry for a longer period of time
- Who get paid a sizeable day rate.
The paperwork you should gather prior:
Prior to contacting a help to buy Mortgage broker, you should have at least these documents ready for viewing as this will greatly expedite your waiting time.
- 1-3 years’ worth of accounts prepared by an accountant if part of a limited company
- SA302’s for 1-3 years – this is the self-assessment form that shows how much personal income you declared to HMRC and how much tax you paid on said income.
- Bank statements for 12 months from all your accounts
- Proof of your deposit
- Details of any debt repayments and other outgoings(Your credit report might do the trick)
What will help you as a help to buy self-employed mortgage applicant:
- Sizeable Mortgage deposit( although you only need 5% for your help to buy mortgage )
- No defaults on personal/business credit file
- No outstanding debts
- Up to date bank/company accounts
- Sizeable taxable income
PS. There is no such thing as a self employed Mortgage but rather the way Lenders assess self employed borrowers are much different. Always seek advice(if in doubt) from a reputable mortgage broker.
Note: Be aware that self-cert mortgages, mortgages in which you declare your very own income and the creditor doesn’t require proof are no longer available.
The help to buy self-employed mortgage dream is truly alive! Find the right help to buy mortgage broker and you could be just fine.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.