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It’s Getting Easier to Apply for a Mortgage as a New Business Owner
Mortgage applications are an important aspect for people starting up new businesses to help them get the required capital to run the show. The fact that they are getting easier is all the more a matter of delight. Here's a quick read to learn the stuff happening in this area. Read on!
Buying a property and setting up a new business are two of the biggest achievements possible in life. If you have recently started a new business and you are looking to buy a house, some people might think you’re crazy to try and get on the property ladder during the infancy of your business. Nevertheless, it’s fair to say that the conditions for young entrepreneurs looking to apply for a mortgage have changed for the better in recent years.
The fallout of the global economic downturn in 2008 meant that many mortgage lenders were forced to tighten their net and adopt more stringent lending criteria. Entrepreneurs who may have previously opted for self-certification mortgages that did not require them to prove their income were left in limbo.
For some time after the 2008 recession, the prospect of obtaining a mortgage filled most new business owners with complete and utter dread. There was a long-held fear that most mortgage underwriters would throw out applications from new entrepreneurs due to their lack of trading history. While that may have been the case, it gives us great pleasure to announce that it’s getting easier to secure a mortgage as an entrepreneur.
While PAYE employees have always had it easier when it comes to applying for and obtaining a mortgage, self-employed entrepreneurs are starting to benefit from lenders’ more relaxed approach to borrowing to new business owners with fundamentally sound finances. If you’re wondering how to negotiate the mortgage application process as an entrepreneur, let’s consider some of the most pertinent points for your application.
Historically, mortgage lenders will have wanted to see at least three years of company accounts to underwrite a mortgage to an entrepreneur. However, the length of time lenders require has changed, with some lenders now only requiring two or even one year of full trading. Lenders are also more interested in your personal tax account rather than your company’s accounts, so you’ll need to be able to demonstrate proof of earnings into your personal account. This may involve submissions of your SA302 forms if you are registered as self-employed.
Get the Latest & Recommended articles in your InboxIf you know you want to make a mortgage application in the short to medium term, it’s a good idea to keep capital spending in your business to a minimum. The last thing you want is to splash out on office equipment and other business costs that could eat into your earnings and affect your income in the eyes of lenders. You don’t want to be left battling to justify your business plan with an underwriter.
When getting an initial agreement in principle with a lender, be mindful that you’ll only have a set period of time to act on the agreement. For instance, Trussle’s review of the Nationwide mortgage application process states that their agreements in principle last for 90 days, which is generally an industry standard timeframe. Before you dive in after the agreement in principle and make that all-important mortgage application, be sure to ask yourself whether it’s the right decision at the time of your career.
Don’t be afraid to speak with independent mortgage brokers and advisors that will have experience handling applications on behalf of entrepreneurs and self-employed professionals, helping them to find lenders with the most suitable risk appetite.
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Any facts, figures or references stated here are made by the author & don't reflect the endorsement of iU at all times unless otherwise drafted by official staff at iU. This article was first published here on 18th June 2019.