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Majority of self-employed people believe it is harder to get a mortgage

The majority of self-employed workers in the UK, some 71%, believe it’s harder for them to get a mortgage and blame unfair application processes.

Overall some 22% believe that they are being ‘penalised’ for being self-employed, 33% say gathering the necessary documents for a mortgage application is a challenge as they generally are asked to provide more financial information than those in full-time employment.

The annual mortgage saver review from lender Trussle also found that self-employed workers are paying up to 400% more in broker fees and 11% felt victimised or overlooked during the application process.

It points out that there are 4.85 million self-employed workers in the UK, amounting to 15% of the working population, and this is estimated to rise to 5.5 million by 2022.

Dilpreet Bhagrath, mortgage expert at Trussle, pointed out that the process of determining affordability can be much more convoluted for the self-employed. Most lenders require at least two years of certified accounts and SA302s, proof of your deposit or last mortgage statement, your latest three bank statements, proof of address and identification.

‘The way self-employed people are assessed varies between lenders, making applying for a mortgage more confusing and increasing the chance of errors. Some self-employed workers, like contractors and freelancers, are assessed purely on their day rate, but others are judged on the average of their past two years of earnings, regardless of what they earn at the time they apply for a mortgage,’ she explained.

‘Some lenders will also classify self-employment as how much of a business someone owns, which altogether leads to inconsistent lending criteria. This can make it harder for self-employed people to pass their lender’s affordability test. Just 5% feel their financial assessments during the mortgage process are fair,’ she added.

She also pointed out that some of the financial documents required in a self-employed mortgage application can only be accessed by HMRC or by hiring an accountant, making the process even more costly and time consuming. Indeed, the research found that 33% of self-employed borrowers thought gathering information for their application was a challenge, proving how taxing the process can be for them.

Of those borrowers who opt to pay for advice, typical broker fees can cost around £500 to process an application from someone in full-time employment. But, 21% of self-employed borrowers admitted they were required to spend much more due to the complexity of their cases, with amounts reaching £2,500, some 400% higher than what fully-employed borrowers generally pay.

‘Don’t be put off for applying for a mortgage. Although the process can seem daunting, there’s plenty of free advice and policies available to help make it easier,’ she added.