Whether you’re a contractor, company director or sole trader, when it comes to applying for a mortgage or remortgage loan, self-employed people face a number of challenges. Since the financial crash, and with the stricter regulations of the mortgage market review now in force, lenders have necessarily become more cautious and are particularly wary of freelancers with fluctuating income.
How freelancers are assessed
In terms of mainstream lenders, many are just not sure how to handle applicants who aren’t employed by a third party; for hopeful borrowers who haven’t been self-employed for more than 12 months, some lenders may simply turn you away. The first hurdle arises in the varying underwriting processes used to assess the risk level of self-employed people. For example, contractors are assessed differently from company directors, and the underwriting process may differ drastically according to different lenders.
That being said, the criteria for self-employed people to secure a loan are similar to those of employed borrowers, with lenders looking primarily at credit score and the stability of accounts to determine whether a candidate meets the rigid affordability criteria. However, the process of verifying that these criteria are met often takes substantially longer for self-employed applicants.
Finding the right lender
Freelancers should also do careful research into the mortgage options from which they could benefit most, like offsetting, which allows borrowers to lower their interest rate by putting money aside in an account with the same lender. This usually works well for self-employed people with changeable income who can put money aside to reduce their rate, but still access those funds if needed.
For self-employed people, the key to securing a mortgage loan that satisfies your financial needs is to arm yourself with accurate information and expert guidance. The right lender may be able to provide the funds you need for your dream property without exorbitant interest rates, whereas an unsuitable lender may give a flat-out ‘no’.
At Homeline Mortgages, we have an in-depth understanding of how to navigate the complex mortgage market. Our systems are constantly updated with the latest deals and borrowing opportunities, allowing our advisors to give you the guidance you need to secure a mortgage or remortgage loan, no matter the type of freelance work you do.
For more information on Homeline Mortgages’ expert mortgage advice services, contact us today. All consultations are 100 per cent confidential.