On top of this 63% of microbusiness owners think the self-employed have to jump through more hoops than traditional employees, with it being especially difficult for those new to freelancing.
And 61% think mortgage advisors do not understand their financial situation while 45% think mortgage providers don’t want them as customers, according to the research carried out by IPSE, the Association of Independent Professionals and the Self Employed.
The research also found that 61% believe it’s more difficult to supply the financial information required when applying for a mortgage if you’re new to independent working
To ensure more self-employed people can access a mortgage, IPSE is calling for mortgage advisors to be given better advice on independent working and a Government review into lending to independent professionals.
‘Getting a mortgage is a major concern for the self-employed, despite 4.5 million people choosing to work independently in the UK. The whole culture around mortgage lending to the self-employed needs to be changed to accommodate the modern way of working,’ said Chris Bryce, chief executive of IPSE.
“It’s crucial that better advice is given to mortgage advisors to provide them with a better understanding of independent working to ensure the self-employed are treated fairly. A dedicated member of staff is another way to achieve this,’ he pointed out.
‘The Conservative Party made a commitment to review mortgages for the self-employed in its business manifesto and we look forward to working with the new Government on this important area,’ he added.
According to Paul Winter, chief executive of the Ipswich Building Society, too many credit-worthy borrowers with unusual circumstances are overlooked by mainstream mortgage lenders. ‘Our view is that mortgage misfits, including the self-employed, freelancers and contractors, should have the same level of choice and access to the mortgage market as any other group,’ he said.
IPSE has issues some top tips for the self-employed seeking a mortgage. Top is ensuring that you have proof of income as self-certifying your income is a thing of the past and you now need to show you earn the money you say you do. If you have a company, this can be company accounts, otherwise other proof may be needed such as paid invoices, or even pay slips from employed work in a similar field over the last two years.
Applicants also need to show that they will continue to get work and this can be done by showing you have had contracts renewed in the past or showing you have worked lined up. If you do not you may need to show you can meet mortgage payments with saving for at least a couple of months.
They also need to make sure they have the necessary paperwork in place and need to speak to an accountant if necessary as they will provide signed accounts and any other information. Applicants are also advised to keep all relevant paperwork proving their current address and identity, and be prepared to provide further information such as passport and NI number.
The self-employed could also consider using a specialist broker who may be in a better position to smooth things over, check paperwork and generally make the process a bit easier, or consider speaking to an existing lender as it is easier to pass affordability checks with a current lender than with a new lender, although this is likely to change soon.
