Getting a mortgage is hard enough at the best of times.
Couple that with being self employed and the whole process can be a bit of a nightmare.
I regularly help clients get a reference together for their lender – a standard process made much more difficult by lenders and mortgage advisors lacking a clear understanding of self employed versus owning a limited company!
I find it absolutely incredible that some (note the word – some!) who earn their money through providing such services have not even done the basic research to understand their clients!
I digress so back to the point ….
Moving house is stressful. Delays in obtaining a mortgage add to this stress.
The key is preparation!
If you work for yourself either as a sole trader / self employed or as a director of a limited company make sure that you get your ducks in a row ready for that mortgage application process to swim along smoothly …
- Make sure that you have your accounts up to date with all of the documentation to hand – you will need a profit & loss account and balance sheet.
- Go back and find the same for the last three years! You will need at least the current & last three years to satisfy most lender requirements.
- If you haven’t had your own business for 3 years then you will need your PAYE P60s and / or P45s for the same period.
- The objective is to have a clear statement of proof of earning for the last three years and this current year.
- You will need to get the proof of earning signed off by your accountant.
- Make sure that you tell your accountant about the house move in plenty of time. It is usual that the lender will want them to complete a reference – so they need to schedule in the time to do this. Don’t just drop this on them at the last minute!
- If you don’t have an accountant you have two choices -First choice is to get one but bear in mind that an accountant (well a good one anyway) will not just sign off proof of earning on your say so. They will want to prepare / check your accounts and be able to verify the earnings via self employment returns and self assessment etc.
- Or the second choice is that some lenders will work on a form called an SA302 which you would get from HMRC. This shows your tax calculation. Some lenders will take this as confirmation of your earnings. However do make sure that your lender will use these and that you have them!
Hopefully this will help a little to alleviate the stress of the mortgage application.
My message to lenders and mortgage advisors – come on earn your money!
Make sure that you fully understand the different between a self employed sole trader and a director of a limited company.
That is what you are paid to do!
Big thanks to Elaine Clark from Cheap Accounting for this weeks guest blog.