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Mortgage Glossary
Self Employed Mortgages
 
Everyone who can prove they have an income can get a mortgage; this is true for the self employed people too. Although they might find it a little harder to get a mortgage than the ones who are employed by a company, it is possible.

First of all let us ask the question, which came to mind while you were reading the first lines of the article? Why do self employed get a mortgage harder the other employees? They might earn much more than other employees, so where is the problem? If you are self employed, then you surely know that some months are better than others. This means that you do not have a fixed income each and every month; your income varies according to your profits. And this would be the lenders problem: instead of variable incomes they would like to see some pay slips which prove that you have earned a specific amount each and every month. This is very difficult when you are self employed, because your monthly income will fluctuate. In this case lenders will accept an estimated income, which still has to meet their specific criteria.

In many cases self employed mortgages are offered to those who have been in business for less than three years. If you have run your business for more than three years, and of course you have accounts to prove it, you might be able to get a mainstream mortgage. Why? Because you can prove to the lender that you are a professional, you are capable of running a business for a longer period of time. Actually this is what lenders want in the case of self employed: some stability. This way you can negotiate a better deal, for example you might get a somewhat lower interest rate.
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Offers for self employed present higher risks to the lender, than other types of mortgages. That is why they might ask for a higher initial deposit or there will be a higher interest rate. In every case the lender tries to make sure that he will get back the amount of money he gave away. But these conditions vary from lender to lender, so you should do a little research before you sign a contract in order to find yourself the best offer. Also, you should prepare some documents, just in order to make things quicker. You should provide audited accounts, and bank statements, so you should keep these documents handy. As it has already been said, in some cases you do not have to prove your exact earnings, an estimated income is enough. Let us now see the advantages and disadvantages of self employed mortgages.

Self employed mortgages have quite a few advantages. You may not have to prove your exact income, if a lender sees that your business is all right, he might accept an estimated value. This will save you a lot of time, since you won’t have to gather all the specific documentation. Maybe this is the most important advantage: it is flexible. The lender may take irregular earnings into account, and the repayment of the mortgage becomes more flexible as it would be in other cases. This means that if you just got some extra money, you can pay back more or you can shorten the period the repayment was agreed on. In these cases, all you have to do is talk to your lender. Another advantage might be that the amount you borrow is based on your real earnings, not on the amount you gave to the taxman. It is easy to see, that this will entitle you to a higher amount of money. In short terms, these would be the advantages of a self employed mortgage. Let us now talk about the disadvantages.

As everything in life, self employed mortgages have a few disadvantages. The first might be that fewer lenders offer mortgages for the self employed than to common employees. So it might be a little harder for you to find a lender with a good offer. Do not worry; it is just a little harder, not impossible. You might be the subject of a little bit higher interest rates just because you are self employed. If you are a good negotiator, you might persuade the lender that he does not have to raise the interest, because you are a responsible person and you can offer him stability. By stability we mean that you are prepared to pay the monthly amount you have agreed on. The last disadvantage is discussable too: the best offers might be available only through mortgage brokers, whom you have to pay. Yes, you might ask a mortgage broker to help you out, but you can find free advice on the internet, so you do not have to pay a dime. You can also avoid paying to mortgage brokers if you do the homework yourself. So if you want to sacrifice a small amount of time in order to save some money, you won’t have to pay anyone to find the best offer for you. You can search for the best offer on the internet, by calling different lenders, or by having a face to face discussion. You can see that with a little effort all the disadvantages of a self employed mortgage can be avoided, all you have to do is try.


Now you know the basics of self employed mortgages, all you have to do is look for the best offer that fits you the best. If you definitely can not find a good offer, than you should try two things: try to discuss with your lender about a mainstream mortgage (if you are in business for about three years), or in the last case you might get professional help from a mortgage broker. Start looking for the best self employment mortgage and be confident: you will find it.