Generally in life, deals are only done when it benefits both parties. A one-sided deal is not in the interest of everybody involved, and any deal realistically should bring benefit to all-comers.
This might not be something you think too much about when buying those discounted tins of beans in the supermarket. But even here, the seller and the buyer benefits, even if the profit margins of the seller might be small.
Enough about beans. Let’s talk about mortgages. When you apply for a mortgage, you are applying to enter into a deal. You are looking to commit to a financial agreement in order to secure a property you can call your own – even if it will take you a long time to own it outright.
Unless you happen to have a couple hundred thousand pounds knocking about, you will need to bring in a mortgage lender to stump up the funds to afford the home in question.
That’s an easy thing to say. But recent research has shown that for many self-employed workers looking to strike such deals, a growing frustration is being felt. They are being faced with a perceived disinterest and lack of willingness from lenders to deal with this type of worker.
This aloofness, if you will, can really make things difficult and affect buying plans. What’s behind it though? And more importantly, what can be done?
A perceived reluctance
Foundation Home Loans has carried out research that indicates that more than half of self-employed mortgage applicants believe there to be only a restricted number of lenders available to them.
While 51% of those spoken to aired these views, 59% claimed it took longer to apply for and secure a mortgage deal as a self-employed worker.
It would be easy to read these statistics and lament the mean old lenders. The easy reading is that they are aloof and inflexible when it comes to catering for the mortgage requirements of self-employed workers.
However, the truth might not be quite as simple as this…
Is there reluctance to engage with self-employed workers?
Obviously it’s not easy to cover all the lenders out there when answering this question. Different lenders will have differing approaches, and some will naturally be more accommodating or better placed to deal with self-employed workers.
It is unlikely however that a lender would simply disregard a self-employed worker’s mortgage application squarely on the basis that that is how they earn a living.
What the recent research has found is that only 14% of self-employed workers interviewed have actually been declined a mortgage because of their worker status.
What is likely to be a greater factor is the added complications of proving affordability and legitimacy when applying for a mortgage as a self-employed worker.
Lenders may find it difficult to work with self-employed workers for a number of reasons. One is around affordability and proving this. Another is that it typically takes longer for lenders to assess, understand and underwrite mortgages for self-employed workers.
These have long been factors in this space. But the pandemic and the problematic effect it had on many self-employed workers is also a factor at present.
Some lenders have gone so far as to create specific affordability criteria for self-employed applicants. Natwest is an example of a lender that has made such a move.
How can this be changed?
As a self-employed worker, being vigilant and having your accounts in order and making proof of your affordability as easy to understand as possible is key. This could be the difference between a lender seeming aloof and finding one that’s actively keen to engage with you.
Utilising the services of a contractor mortgage broker or freelancer mortgage broker is also a wise move. The research from the Foundation Home Loans shows that 44% of self-employed applicants are using mortgage advisors or independent financial advisors.
We definitely advise considering getting the support you need from industry experts to ensure that everything is order and ready for a lender when applying. This could be the difference between enjoying a relatively smooth mortgage application process, and ending up missing out and feeling frustrated.