Self employed mortgages - what has happened to the market?
Over the past five years, the self cert mortgage market has boomed - allowing people who've had a hard time proving their income (e.g. many small business owners) to secure mortgage deals.
Following the implosion of the mortgage market in recent months, a large number of mortgage companies have pulled many of the most attractive deals, with self employed people affected more than most.
The self-employed typically have a harder time proving their income - most lenders require three year's accounts, which many start-ups don't have. Additionally, small business owners working through their own limited companies may withdraw small salaries, with the bulk of income in the form of dividends - this makes the business owner's financial position appear weaker than it is.
Motley Fool has published a good article on this subject, explaining what has happened to the self cert mortgage market. Lenders and deals are still available, but you need to know where to look, according to the article.
Whereas you might be looking at a mortgage rate of around 6% a year ago for a self cert fixed rate deal, these rates are in the 7 to 8% region now, with lenders typically charging an "arrangement fee".
Even if you are able to afford repayments at these rates, you're typically looking at a maximum 75% LTV (Loan to Value) on a property purchase, meaning you need to find a 25% deposit. There are a few lenders still offering 85% LTV deals, but the interest rates available will be higher.
You can read the article here.
To find out the best mortgage deals available to small business owners, simply fill in a mortgage finder, and our specialist IFA will get back to you shortly with the options available to you.
Posted June 27, 2008
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