Is A Self Employed Mortgage the Right Choice For You?

By: Daniel Millions

The number of self employed people in the UK is growing. According to the Office National Statistics (Q4 2006) there are a 3.8 million people that fall into the category of working for themselves. One reason for this growth is that work patterns are changing with more people than ever deciding to work from home.

This change in work patterns prompted mortgage lenders to develop a new product specifically targeted at the self employed who otherwise may not be able to meet the criteria of a standard residential product. They were quick to realize that these people would find it more difficult prove their income in the traditional way.

Working for themselves meant they would be unlikely to be able to produce pay slips and that their income would not follow the standard regular monthly payments of an employed person. Not wishing to miss out on this growing category of home buyers the self employed mortgage scheme was born.

So how do you determine if you may be a candidate for a self employed mortgage? Here are a few examples to help you decide whether this type of mortgage is the best option for financing your home purchase.

Obviously, this type of mortgage is primarily designed for someone who works for themselves on a full time basis. For example, if you are running your own shop or driving your own taxi, then you will probably need this type of mortgage as you may find it difficult to prove your income. After all, if your accountant is good at his job he will be doing all he can to legally minimize the amount of profit you have to declare in order for you to save on the tax you would otherwise have to pay.

What if you are not Full Time Self Employed?

Not all people work for themselves full time. Some people work on evenings and weekends, doing additional jobs as delivering leaflets, providing bouncy castles for children's parties, fixing cars or a whole host of other part time activities to bolster their income. These people are classed as part time self employed and if they want to use the income from this to qualify for a mortgage, they will probably need a self employed mortgage to do it.

But what if I am Employed and Have Irregular Income?

Finally, there are also people who are in the normal sense employed, but may still need a self employed mortgage. These are people who earn from dividends (such as major company shareholders), from commission (such as sales people) or from bonuses (such as workers in the City). While these people are not self employed, their income is irregular, which is one of the key criteria for qualifying for a self employed mortgage. If you are unable to show a regular income this type of mortgage is your best choice for funding a house purchase.

In all the above cases, in order to get a self employed mortgage, you will have to make a declaration of earnings (saying how much you expect to earn in the coming months and years) and you may have to get a statement showing previous income from your accountant. Once you have that information, it is quite straightforward to get a self employed mortgage.

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