Property Finance For Self Employed?

[Gemma Rowlands]

Okay, so I'm fed up of renting, and need my own place. However, my partner is self employed, and I was too up until very very recently. Looking around, it seems as though nowhere would touch us with a barge pole - but there must be a way to get around things, mustn't there?

Does anyone here have any kind of advice about how to go about getting a property when you're self employed?

 

[Pete Brindle]

Well the thing you have to do is to prove that you can afford it. The more information you can give them about your income and outgoings the better. It might be difficult to get the finance you need, but not impossible. It also helps if you have a good deposit, so get saving. That in itself shows just how good with money you are, and it could help you to get a better chance.

 

[Gemma Rowlands]

Well the thing you have to do is to prove that you can afford it. The more information you can give them about your income and outgoings the better. It might be difficult to get the finance you need, but not impossible. It also helps if you have a good deposit, so get saving. That in itself shows just how good with money you are, and it could help you to get a better chance.

All the banks I've been in touch with say that you have to be able to provide 5 years of receipts, which I just can't do at the moment. I have got them, but I was only just starting up at that time so the profits were awful. I have a feeling they would ruin things for me rather than help me get the finance I'm looking for!

 

[saltire]

Mortgages seems to be really difficult to come buy just now. I'm certainly seeing a massive upturn in demand for our rental properties. In fact just now we have nothing available!

These new affordability checks they have built in seem to be slowing everything down and I hear from a few sources that if you dont have at least a 20% deposit most banks wont entertain it.

There are schemes up in Scotland where you can share ownership etc. I'm not sure where you're based but it be worth looking into whether that's an option or some of the schemes the government are piloting to get people onto the housing ladder.

Have a look here as a starting point https://www.gov.uk/affordable-home-ownership-schemes/overview

 

[Gemma Rowlands]

Mortgages seems to be really difficult to come buy just now. I'm certainly seeing a massive upturn in demand for our rental properties. In fact just now we have nothing available!

These new affordability checks they have built in seem to be slowing everything down and I hear from a few sources that if you dont have at least a 20% deposit most banks wont entertain it.

There are schemes up in Scotland where you can share ownership etc. I'm not sure where you're based but it be worth looking into whether that's an option or some of the schemes the government are piloting to get people onto the housing ladder.

Have a look here as a starting point https://www.gov.uk/affordable-home-ownership-schemes/overview

Yeah, I have the deposit actually so that's not really a problem. I'm not sure how I feel about shared ownership but I'm well aware that it's something I may have to think about. Moving isn't desperate for me at the moment so perhaps I shouldn't rush, but I would really like a nice new shiny place to call home!

 

[Pete Brindle]

I'm not sure how I feel about shared ownership but I'm well aware that it's something I may have to think about.

Be aware of the terms of the shared ownership if you do that. For example:

- If the person you're sharing ownership with wants to sell their share, do you have to sell, and do you get any say in who they sell to? Do you get first refusal? Etc.

- If you're living in the property, will you have to pay rent to the other owner, how much, and how secure is your right to be the tenant rather than the other person living there. And if they sell, is the amount of rent you pay secure, etc.

- If YOU want to sell, what kind of permission do you need from the other owner.

All boring things, but definitely worth asking.

 

[Gemma Rowlands]

Be aware of the terms of the shared ownership if you do that. For example:

- If the person you're sharing ownership with wants to sell their share, do you have to sell, and do you get any say in who they sell to? Do you get first refusal? Etc.

- If you're living in the property, will you have to pay rent to the other owner, how much, and how secure is your right to be the tenant rather than the other person living there. And if they sell, is the amount of rent you pay secure, etc.

- If YOU want to sell, what kind of permission do you need from the other owner.

All boring things, but definitely worth asking.

Thanks for this, it's helpful. I'm so wary about shared ownership for all of these reasons. I just want to own my own house! I feel like I work SO hard but never get anything to show for it, and it's very frustrating! But I'll just have to keep trying I suppose.

 

[Robert Frost]

Did you get anywhere with this Gemma?

 

[Gemma Rowlands]

Did you get anywhere with this Gemma?

Not as yet, no. I have had a couple of meetings with the bank but their general stance is "well, all your work could disappear couldn't it". Which is true, but rather unlikely. Perhaps I'm just not destined to own the house of my dreams!

 

[Pete Brindle]

Not as yet, no. I have had a couple of meetings with the bank but their general stance is "well, all your work could disappear couldn't it". Which is true, but rather unlikely. Perhaps I'm just not destined to own the house of my dreams!

The trick is to get a huge deposit as well as being able to show your income. Okay, so I know it's not as easy as that, but if you can show them that you're good with your money, they will be more likely to lend you some. And explain to them that it's very unlikely that ALL of your clients would pull out at the same time, and that even if some did, you would still be able to cope. The lack of work expenses for you should really help, shouldn't it?

 

[Mike Turner]

It will be a longer process than other people who have stable income, but there's no reason you shouldn't be able to get a property of your own at some point in the future. Have you looked at all providers, or are you focussing on just who you bank with at the moment? You might find that if you broaden your search a little bit you will have more luck. In fact, some banks prefer "high risk" applicants because they figure they'll make more money from them. Slightly unethical, but could work to your advantage in some cases.

 

[Gemma Rowlands]

It will be a longer process than other people who have stable income, but there's no reason you shouldn't be able to get a property of your own at some point in the future. Have you looked at all providers, or are you focussing on just who you bank with at the moment? You might find that if you broaden your search a little bit you will have more luck. In fact, some banks prefer "high risk" applicants because they figure they'll make more money from them. Slightly unethical, but could work to your advantage in some cases.

I fully expect to have a house "in the future", it's just frustrating because I've been paying rent for all this time, and I've worked out that it's actually more than the mortgage payments would be on the amount that I need to borrow - so if the bank want proof that I can pay that kind of money then they just need to speak to my landlord, who can confirm that I haven't missed a payment, or even been late with one, for the past three years!

I do really want to stay with the bank that I'm with, because I find it much easier to manage things if I do. But yes you're right, I would be better having a bit of a look around to see if there is anywhere that would be happier to lend me the money, even if I do have to pay a bit of higher rate for it.

 

[Pete Brindle]

I've worked out that it's actually more than the mortgage payments would be on the amount that I need to borrow.

This is what's so annoying for a lot of people, because mortgage payments generally are cheaper unless obviously you're wanting to buy a bigger place than you're currently renting, and at least you have an asset that they can take from you if you don't keep up with the repayments. If you're renting, and you don't pay the rent on time, how would the landlord get the money back from you if you didn't own anything of great value? I know that's not the banks' problem but still an interesting thought that it's easier to rent with no backup for missed payments than it is to get a mortgage!

 

[Mike Turner]

This is what's so annoying for a lot of people, because mortgage payments generally are cheaper unless obviously you're wanting to buy a bigger place than you're currently renting, and at least you have an asset that they can take from you if you don't keep up with the repayments. If you're renting, and you don't pay the rent on time, how would the landlord get the money back from you if you didn't own anything of great value? I know that's not the banks' problem but still an interesting thought that it's easier to rent with no backup for missed payments than it is to get a mortgage!

When I rented when I was a student, I was paying £500 a month for a fully furnished 2 bedroom apartment. Now that I have a mortgage we're paying £250 a month, so literally half. My wife already had a place when we moved in together so we didn't have to worry about buying new furniture or anything like that. Prove to them that you can afford it. Find out what your monthly payments would be and, if you can, put that amount to one side to show that you consistently have the money there that you need in order to pay it.

 

[Gemma Rowlands]

When I rented when I was a student, I was paying £500 a month for a fully furnished 2 bedroom apartment. Now that I have a mortgage we're paying £250 a month, so literally half. My wife already had a place when we moved in together so we didn't have to worry about buying new furniture or anything like that. Prove to them that you can afford it. Find out what your monthly payments would be and, if you can, put that amount to one side to show that you consistently have the money there that you need in order to pay it.

We don't really need furniture either as we had to furnish the place we're renting so there shouldn't be too many costs upfront other than the mortgage itself. I actually have a meeting with the bank later this week so fingers crossed we can talk through some issues and try to come to an agreement about them. Yes the rent we're paying IS higher than the mortgage we're applying for, so possibly if we can prove we've not been late on any payments that might help our case a little. Plus we have enough savings to put down the deposit and cover the first few months of the mortgage, so there are definitely things that we need to discuss.

 

[Mike Turner]

We don't really need furniture either as we had to furnish the place we're renting so there shouldn't be too many costs upfront other than the mortgage itself. I actually have a meeting with the bank later this week so fingers crossed we can talk through some issues and try to come to an agreement about them. Yes the rent we're paying IS higher than the mortgage we're applying for, so possibly if we can prove we've not been late on any payments that might help our case a little. Plus we have enough savings to put down the deposit and cover the first few months of the mortgage, so there are definitely things that we need to discuss.

You may find that the mortgage company are willing to take a payment from you that covers a certain amount of the monthly payments, or it might be a good plan if you just put more of a deposit down in the first place so your monthly repayments would be lower. The lower the monthly payments, the less of a risk people are taking with lending you money, and that's the situation that you need to be in, with them convinced that you're a safe bet and that they're doing the right thing. Of course they can repossess your home if you don't pay up, but depending on how far into the term you are it might not even be worth it as they won't have earned very much by way of interest from you.

 

[Gemma Rowlands]

You may find that the mortgage company are willing to take a payment from you that covers a certain amount of the monthly payments, or it might be a good plan if you just put more of a deposit down in the first place so your monthly repayments would be lower. The lower the monthly payments, the less of a risk people are taking with lending you money, and that's the situation that you need to be in, with them convinced that you're a safe bet and that they're doing the right thing. Of course they can repossess your home if you don't pay up, but depending on how far into the term you are it might not even be worth it as they won't have earned very much by way of interest from you.

Funny you say that because that's how we dealt with things when we first started renting. They wanted proof of income, we couldn't give it to them, but we could pay the whole 6 month contracted tenancy in advance, so we did that, and they were more than happy with it. And it was great for us, of course, because we didn't have to worry about paying rent for a little while.

We're actually starting to view slightly smaller, and therefore cheaper, properties, because we're coming to the conclusion that the more we try to get the amount of finance we're looking for at the moment, the less likely it is that we'll ever find anywhere at all, and both of us are becoming quite restless with it now.

 

[Lauren Turner]

Well this is something I have experience of, and I hate to break it to you but there's a long journey ahead. If you don't need to borrow all that much then you would be seriously better off asking family members whether you could borrow from them and pay it back bit by bit, that's always an option, but not one that everyone would consider. Obviously not everyone has savings to the extent that this would be possible, but there's no harm in asking, is there.

 

[Gemma Rowlands]

Well this is something I have experience of, and I hate to break it to you but there's a long journey ahead. If you don't need to borrow all that much then you would be seriously better off asking family members whether you could borrow from them and pay it back bit by bit, that's always an option, but not one that everyone would consider. Obviously not everyone has savings to the extent that this would be possible, but there's no harm in asking, is there.

I know. In fact I've stopped looking at the moment and am just focussing on trying to raise the deposit. There's no point in continuing the way I was, looking at properties and having my heart set on one, only to then find that there was no way that the bank was going to finance it, leaving me to look somewhere cheaper that I wasn't really all that interested in. So yeah, I'm taking a back step at the moment and just trying to prepare myself a little better for it.

 

[Pete Brindle]

Is there any way you could get a guarantor mortgage on it? I have a friend who has just signed an agreement with the bank to mean that if he is unable to pay for his mortgage, his brother (who is on a huge salary) would have to pay it for him. Obviously I don't know if you have anybody who you could call upon in that respect, but I just thought I'd mention it in case it was helpful.