The way we work today has changed. Many more of us have the freedom – and the uncertainty – of ‘portfolio careers’ and other non-traditional forms of employment. In other words, we get to be our own boss, whether as a sole trader, a contractor or a limited company director. It can be exhilarating, but it can also be worrying.
One concern for many is whether there’s an extra price to pay when it comes to buying our own home. A definite fear factor lingers in the air when it comes to self-employment and mortgages. How can we prove our income when we don’t fit neatly into a salaried box? Will we be restricted to a narrow selection of uncompetitive deals? Will anyone even want to lend to us?
Take it from us: there’s nothing to fear. Lenders live in the modern world – and they want borrowers. They do need to know, however, that you’ll be able to afford your mortgage now and in the future. So you just need to prove this. You’ll need to show them that you have been trading for a certain period – the industry standard is two years, though some lenders ask for three – and be able to supply figures to prove your income.
The way to do this is simple. To get yourself mortgage-ready, you’ll need some information from HMRC. Ask for your SA302s for the last two or three years. These show the income you declared, the tax paid and your profit. For lenders, they function as payslips. The lender will look at the numbers and – unless there’s an enormous discrepancy between the years – they’ll be able to use the figures to calculate the amount they’ll lend. That’s all there is to it. There should be no discrimination. When it comes to the amount you need for a deposit, say, you should fare the same as everyone else. And contractors may find it even easier, with lenders willing to lend based on your day rate.