What Does A Self-Employed Mortgage Broker Do?
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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What Does A Self-Employed Mortgage Broker Do?
David Sharpstone explains how a mortgage broker can help self-employed workers through the application process and beyond.
Podcast approved by The Openwork Partnership on 01/05/2024.
What does a self-employed mortgage broker do?
We’re essentially talking about a mortgage broker who specialises in the self-employed, rather than a mortgage broker that doesn’t specialise and is more generalist.
It might seem like they’re very similar. I can only speak from my own experience as someone who does focus on self-employed people, but I feel that we have a deep understanding of the different types of self-employed situations.
You might work through your own limited company as a director, or as a sole trader. We work with clients in partnerships or even limited liability partnerships. They might be contractors or subcontractors via CIS, or even self-employed contractors who are paid through umbrella payroll.
Each type of self-employed person comes with their own nuances on a mortgage application. Lenders have their own rules and policies and will treat them all differently. As an expert in self-employed mortgages I bring almost 20 years of experience across the full spectrum, to help people buy a home that they really love.
What’s the difference between going to a mortgage broker that specialises in self-employed mortgage applications versus other brokers or high street lenders?
Largely, it’s going to come down to experience. There are some incredibly knowledgeable mortgage brokers out there, but often they’re a jack-of-all-trades. They might be able to give advice across a wide spectrum of different people, but not to the same level of detail.
If you’re self-employed and looking for a mortgage, it’s really important to speak to a mortgage broker that specialises in people just like you.
It’s just not worth bothering going direct to a bank if you’re self-employed. They can only tell you their own policy. If you don’t fit with Santander, they won’t tell you that you might fit with Barclays. They’re just going to show you the door.
To give you an example, let’s say you’re a self-employed company director working for a client. They’re paying your limited company. But another client will only pay you through an umbrella payroll scheme.
It often happens. A lot of our clients are IT contractors or engineers with a limited company where some contracts are paid via an umbrella payroll. This is to do with IR35 regulations.
The chances are, if you need your mortgage affordability to be calculated using the gross day rate, we’ve got to find a mortgage lender to deal with all of those things. If you walked into a high street bank that stacks up against all that criteria, you’ve hit the jackpot.
But the chances of actually finding that lender without a mortgage broker are slim to none. That’s where the skill of a mortgage broker comes in – to understand all the different types of self-employment and what the lenders can and can’t do. We stack the different criteria together and find the most suitable lenders for that set of individual circumstances.
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What services are offered by a mortgage broker that specialises in the self-employed?
An FCA regulated mortgage broker, whether they specialise in the self-employed or not, must adhere to a certain level of service. We’re closely regulated and we all have to follow the same guidelines in terms of service.
That being said, a mortgage broker that understands the self-employed will know what documents need to be obtained upfront.
I know what mortgage lenders are going to look for over and above the standard payslips, bank statements and proof of deposit. There are always extra things – it might be a certain set of figures from the accountant, a letter from the accountant or something from inland revenue.
A mortgage broker will also understand that with self-employed people, the chances of getting two identical years of income are slim to none. You have peaks and troughs. It might be that we need to place the mortgage with a lender that won’t take an average of the last two years but instead base mortgage affordability just on the latest year.
A mortgage broker that understands that situation will know which mortgage lenders to go to.
When should I see a broker for a mortgage as someone who is self-employed?
Let’s flip that on its head. The worst time to see a mortgage broker is when you’ve fallen in love with a house and had your offer accepted. You might find that you can’t actually get the mortgage you need.
As soon as you start thinking about buying a property, especially as a First Time Buyer, see a broker. Do it before you get your hopes up, before you spend hours viewing properties that maybe you can’t afford. Sit down with a mortgage broker and go through your figures.
It might be that you’re not quite there yet. A mortgage broker can work with you over the next 12 months to get you mortgage ready. That might mean having some conversations with your accountant.
Obviously we’re not tax advisors, but we can certainly help people with what they might need to achieve in their business to obtain the sort of mortgage they’re looking for. Not everybody is always ready straight away – that’s definitely part of the service that we offer.
Does it cost for an initial consultation with you?
We don’t charge for the initial conversation. We do that to try to help the client out. I put them on the right path.
We do charge at the point that our clients find a property and instruct us to work on the mortgage for them. We then give them advice and recommendations on those mortgage options.
What other advice do you have for somebody that’s self-employed and looking to apply for a mortgage?
If you’ve got a very straightforward income – you’re a teacher or office administrator, you’re not self-employed, your income is the same every month and you have a perfect credit score – maybe you don’t need a mortgage broker.
But in circumstances where people are self-employed, everybody’s got a unique fingerprint of circumstances. It might be the way they’re paid through their self-employed structure. They might have an unusual source of deposit, that may or may not be acceptable to a mortgage lender. Or it might be that the property they’re buying has some quirks to it.
Any of those reasons alone are enough to go and see a mortgage broker. We can ensure that you’re going to the right mortgage lender and not losing days, weeks and sometimes months with the wrong lender, wasting a lot of money and potentially missing out on the house you want to buy.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 01/05/2024.
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