When you are self-employed, arranging a mortgage can be difficult at the best of times. Without the proper advice you can be left drifting, unable to find the right mortgage deal for you. You need to be armed with all the possible tools in order to fight for your mortgage and that includes knowing when it’s the right time to apply. Without the proper advice and mortgage knowledge, judging when to apply can be a guess at best.
Most self-employed business owners don’t know when is the best time to get a mortgage which can be a real problem. Without knowing the right time to get a mortgage, you could end up going through the worst hassle imaginable, when instead, if you’d just waited for the right time, you could have saved yourself the stress AND some money in the process.
Here are a few tips to make sure you’re applying for a mortgage at just the right time.
The best and only time you should apply for a mortgage is when you can afford it. Not only would getting a mortgage you can’t realistically afford be a bad idea, but lenders have strict affordability tests in place.
Simply take your monthly income and minus any expenses. The figure you get from this is your disposable income and lenders use this as the maximum amount you could afford on mortgage repayments each month.
Working out your total income and remembering to include every single expense can be tricky so it’s best to do this exercise once and then come back to it. Your actual figures will depend on your specific circumstances. If you would like some help in compiling your income vs expenditure, please contact Gary or another Active Brokers mortgage adviser to get a personalised version.
Make sure that you calculate your affordability and start work on your mortgage application BEFORE you begin to look for your dream home. Moving home is a highly emotional experience and anything can happen. The last thing you want is to have your heart set on a perfect property to find out later that you can’t afford it.
We have had several clients approach us in the past that have already found their dream house, and, in some cases, have even made an offer. We would not recommend approaching the mortgage process in this way. There was no guarantee that a lender would give them what they needed to get that house. Instead, start your mortgage application early. The best time to start looking at houses is when you already have some knowledge of what lenders will give you, the interest rates, all the fees and how much you can afford. Talk to a broker to start getting an idea of how much you could borrow as their access to the entire mortgage market is key.
When you’re self-employed and bringing in a good amount of income each year, it can often make sense to transition to a Limited Company from a sole trader. However, this can cause problems when you come to getting a mortgage.
The best time to apply for a mortgage when you’re self-employed is when you have at least one years accounts. However, if you’ve transitioned from Sole Trader to a Limited Company in the past 12 months, and therefore don’t have a full years accounts to show as a Limited Company, most mortgage lenders aren’t be willing to accept you. Even if you’ve had years of good accounts working as a sole trader beforehand lenders view it almost like a change of employment and the criteria changes.
The best time to get a mortgage when you’re self-employed is when you’ve got plenty of experience and at least a year or two of filed accounts.
Another important thing to remember once you’ve got your mortgage, whether you’re ready to move home again or not, is to not just sit on the Standard Variable Rate (SVR). The best time to remortgage is when your current deal is up. Your current lender will hopefully offer you a better rate than SVR however we recommend speaking to a broker to compare the whole of the market as lenders generally offer better rates to new customers than they do to their existing customers. This will make sure your monthly repayments stay as low and affordable as possible.
Of course, the most important thing to remember when considering a mortgage is when the best time is for you. It’s a huge commitment to make, possibly the biggest of your lifetime. Make sure you’re 100% certain it’s what you want and get professional advice before making a move on your dream home.