Self Employed Mortgages. A view by London Mortgage Broker, London Mortgage Advice Tuesday, 24th November 2009

It is going to be more difficult for self-employed borrowers to secure a mortgage after the last big lender of self-certification home loans pulled out of the market.

Plans by the Financial Services Authority to ban the controversial deals were blamed by Platform Home Loans for its decision to pull out of the market.These loans were designed for self-employed borrowers with an irregular salary who found it hard to prove their income. However, at the height of the housing boom, they were dubbed “liars’ loans” as fears spread that regular borrowers in full-time employment were using the deals to inflate their income and boost the amount they could borrow. In 2007, half of all deals were approved without a check on the borrower’s income.

If you can prove your income however, there should be no problem to get a mortgage from a mainstream lender.

Self-employed homebuyers and those looking to remortgage can apply for mainstream mortgage deals, but the rules about proving income are more restrictive than for conventional borrowers.Lenders typically require accounts going back a number of years. People working in partnerships or unincorporated businesses may be asked to submit evidence of profits and turnover for the past three years. This is usually available in annual financial statements produced by an accountant or in information provided on a tax return.

Many want 3 years accounts but not all lenders insist on three years’ accounts. Some will take just 1 years acclunts with proof of future earnings via long term contracts,for instance.

It is often a mistake to depress profits to avaoid tax and it could affect the amount you can borrow.