I am self-employed; can I still get a mortgage as I don’t pay myself a high salary?
Darren Pescod, CEO of The Mortgage Broker LTD, offers his advice on a number of common questions and situations his clients face.
A: Most people assume that you need 3 years’ worth of trading accounts to get a mortgage – only a few lenders now have this approach to their lending criteria in today’s market. There are lenders out there who will lend to you based on just one year trading and one year’s accounts so all is not lost. There are also lenders who will lend to you based on two years’ tax returns and they won’t ask for your accounts so there is a potentially better deal to be had by approaching this type of lender – An experienced mortgage broker will know the lenders criteria and will be able to look at all of these options to see which deal offers you the best value, whilst at the same time meeting the lenders underwriting criteria. You haven’t mentioned in your e-mail if you are a sole trader or a Limited Company as this can also affect the lender we approach on your behalf. If you are trading via a Limited Company you have probably been advised to take a minimal PAYE salary and the rest of your annual package in the form of dividends. Thankfully, dividends are taken into account, so if you draw a small salary this should not be a stumbling block for you. We also have access to lenders that will look at the overall net profit of the business, rather than what you have taken out of the business as and when required. If you are a sole trader your net profit will be used. Your next step would be to send through your accounts and tax returns, along with a budget planner and of course some personal detail. This would enable us to run these figures through a selection of potential lenders’ affordability calculators allowing us to get an idea of what level of borrowing could be available to you.