Being a self-employed freelancer often makes it difficult to get accepted for a mortgage, making it that little more difficult to buy the dream house, even when you have a reasonable income behind your belt. The use of a mortgage calculator such as the one from Rightswitch can help you see what options are available, how much you need to pay back over the course of years and how much money you’ll have available for daily living. This article will discuss the best mortgage lenders for self-employed freelancers.
What is a mortgage and what is it for?
First off, what is a mortgage and what is it actually used for? A mortgage quite simply is a loan with interest from the bank in order to purchase a home or form of property. Down payment will need to be put down to demonstrate that you are good for the money. Whilst you have a mortgage the property will be technically be owned by the ‘bank’, however, upon successful completion of paying off your mortgage, the home will then be in your name. Mortgages are widely used and a convenient due to the fact that only a small minority of the population has enough money on hand to by a house out-right, instead, allowing the house to be paid in small instalments over the course of many years.
How hard is it to get a mortgage if you are self-employed?
Being a self-employed freelancer can often be difficult to obtain a mortgage. This is due to there being no guaranteed income every month, something which is required for a mortgage. As well as this, previously individuals exploited the system, making up numbers and lying about their income, resulting in bigger loans from the bank being given out. It is, therefore, a case of verification, and a long one at that. Below we will discuss the mortgage approval process to help you understand it a little bit better.
The mortgage approval process for the self-employed
In order to be considered for a mortgage by the majority of banks, you will need evidence of the following:
- Two year’s accounts history
- A healthy deposit to place down
- A strong credit history
- Proof of quality work within your particular line of work
These will be needed to ensure you are good for the money, providing proof that you earn as much as you do with the extension of 2 years accounts of tax returns being used. A healthy deposit is also required to initially put down on the house (without this you will not be accepted), a strong credit history is vital to ensure that you are able to pay off previous debts within the required timeframe, providing evidence to the bank that you are good for the money and should run in to no problems whilst paying off your mortgage whilst proof of quality work ensures you are able to make consistent money, once again proving that you can and will pay off the debt.
One of the main documents in which the bank will ask evidence for is for 2 years account history or alternatively 2 years of tax returns. Hiring an accountant can help the process if you have the money available, if not simply remain on top of this, ensuring to put in for your tax returns every year whilst updating the books weekly.y
One of the main challenges to the self-employed whilst applying for a mortgage is providing proof of accounts. This is especially difficult if you are a relatively new self-employed freelancer. Moreover, the addition of providing a healthy deposit can also be a difficult process if you do not have much disposable income at the current time, especially since the market for freelancers can often be all over the place. Ensure to store money away each month to have the required funds for a good quality deposit, whilst consistently putting in for tax returns every year.
How to improve your odds of being approved
Simply providing the bank with everything required is your best bet. Ensure you have no previous track record of credit card debt, with evidence of payments, hire an accountant to do your books professionally, save money and provide proof of a healthy, quality deposit in which you can place down and finally enjoy, and do your job well! Provide quality work which provides a consistent income (easier said than done, I know!), all of which will improve your odds of being accepted. Alternatively, incorporating your business will provide further evidence of accounts, consider this especially if you are a new self-employed freelancer.
The best mortgage lenders for the self-employed
Natwest offers a 2 year fixed cashback mortgage. Providing a maximum LTV of 75%, an inital rate of 1.52% until 30th June 2021, 4.21% variable (SVR) and the overall cost for comparison at 4% APRC makes for a fantastic mortgage for self-employed freelancers.
Alternatively, Leeds building society offers a maximum LTV of 85%, 0% variable for 3 months, a SVR variable of 5.69% and overall cost of comparison at 4.8% APRC.
Picking the right lender for you
In order to pick the right lender, it is firstly important to shop around and look through the many options, not selling yourself short. Look at the fees within the mortgage, if these are not affordable then do not go for this particular one. Different mortgages will offer different fees, making them more suitable to you. Remember, the use of the mortgage calculator can help you understand your financials through a variety of different mortgages. Finally, look for any tie-ins, such as exiting the mortgage early which may result in a penalty charge, although unlikely to leave your mortgage, it does happen. Therefore, prepare for the worst and find a no tie in approach or one which houses only a small fee.
Finding a mortgage for a self-employed freelancer can be a difficult task, especially if you don’t have the right paperwork. To increase your chances of being approved, make sure to stay on top of your books and remain positive in good credit history, hire an accountant if possible and be prepared to provide a variety of documents in which the bank may ask for. When choosing your mortgage, ensure it is flexible around you and then you can afford it, consider tie-in fees and most importantly make sure it is right for you.
THE TRIALS AND TRIBULATIONS OF TRADERS TRADING FROM HOME
Steve Haworth, CEO of TeleWare Group
Banks had hoped to keep their London trading floors open amid the worsening coronavirus pandemic, insisting traders were “key workers”. But trading floors were quickly cleared and employees sent to work from home in isolation.
Firms needed to quickly adapt to remote working. This meant recreating the carefully monitored environment of the trading floor at thousands of sites.
With major disruption across the entire sector, it seems the Financial Conduct Authority felt no other choice but to relax regulations on recording calls. But does this measure introduce more problems than it solves?
Why call recordings are regulated
Whilst regulations differ globally, authorities in the UK, US and Hong Kong have long required trading floor phone calls to be recorded for certain activities.
In the UK, the FCA demands financial institutions keep records of all trades and transactions related to certain types of business for at least six months. Recording calls and reporting trades are essential to the regulators’ ability to monitor the markets for abuse, such as insider trading. Requirements to record calls apply to companies that receive and execute client orders to buy or sell in the financial markets.
Each trading floor in a financial firm also has its own set of policies which staff must abide by. For instance, the trading floor manager must ensure that all trade-based calls are recorded and monitored. An often-used policy that still exists is to ban all mobile phones on the trading floor. To enforce this, mobile phones are often stored in lockers and traders are required to use turrets to host calls.
Beyond call recording, most traders and salespeople need to sit together on a monitored trading floor in order to meet regulatory rules. A range of compliance complexities under GDPR, MiFID II and Dodd Frank have meant working from home has simply not been an option for many traders.
The rush to relax regulations
Traders are now required to work from home – if they can. The FCA has said it accepts that some scenarios may emerge where recording calls may not be possible. Adding that it expects companies to “consider what steps they could take to mitigate outstanding risks if they are unable to comply with their obligations to record voice recordings.” If financial services companies are unable to record calls they are then expected to “come up with a plan to fix the problem”.
Yet, trading firms have enough problems to solve without having to decipher call recording requirements. Why should traders spend extra time updating the FCA and coming up with an alternative solution when one already exists?
A smart alternative
Smart solutions – such as mobile call recording which meet global regulations – have perhaps been overlooked as a way to maintain business continuity.
Mobile voice recording technology (MVR) is not new. It has existed since 2011 and includes secure and reliable voice and SMS recording, easy to use conferencing and robust, accessible voicemail. It has matured over the years and proven itself to be flexible and highly reliable.
Technology can keep traders trading from wherever they are. Ensuring they can operate effectively at home while remaining compliant.
STOP THE CONFUSION: HOW TO KNOW IF YOUR BUSINESS MAY BE INSURED AGAINST COVID-19
By Alex Balcombe, Partner at Harris Balcombe
The last few weeks has seen businesses in hospitality, tourism, retail, leisure and more forced to close their doors following the Government’s orders that they should close to prevent the spread of coronavirus.
While this is expected to flatten the curve and reduce the number of coronavirus cases, it will of course have an impact on businesses and employees alike. For small businesses especially, there are many concerns about how they can claim on their insurance to weigh the fall of this impact.
In response to calls to help struggling businesses, the Government has informed the public that companies who are facing turmoil will be able to claim on their business interruption insurance during this difficult time. For most, this is wrong.
The insurance industry has also been extremely vocal that there is no cover for any coronavirus-hit businesses during this tough financial period. This isn’t strictly true either.
How can businesses see through the mixed messaging and best secure their future and their livelihoods and reduce money worries? It’s an extremely stressful time for many companies, and confusion over whether or not they can be covered can only cause more unnecessary stress.
Since it’s a new disease, most businesses will not be covered for business interruption due to COVID-19. In fact, the vast majority of policies do not cover anything related to COVID-19.
That said – don’t rule out the idea that you may be covered. There is a chance that you will be covered against COVID-19, but not know it. This is a very small chance, but your current cover may already protect your business against the consequences of coronavirus, and the nationwide response to it – though those with this cover are unlikely to realise it.
How Could I Be Covered?
Not everyone has business interruption insurance, as it’s not a legal requirement. It is entirely up to the policy holder to weigh up the benefits of having it, and their ability to trade should a disaster happen.
To be considered for cover for COVID-19, there are two types of policy extensions to your business interruption cover that can potentially cover you for this situation:
Infectious Disease Extension
Many policies expressly state which diseases fall within the realm of being an infectious or notifiable disease. If this is the case, your policy will not provide cover. As it is a new disease, these policies will not have included COVID-19.
Other infectious disease extension policies will define the disease with reference to the actions of the government. Since the UK Government has named COVID-19 as a notifiable disease throughout the UK, it is possible that your business may fall into this definition, thus meaning you may be able to make a claim.
However, again, it’s not always that simple. Many policies require the disease to have been on your premises, while others specify a radius from your premises in order to qualify.
Denial of Access Extension (non-damage)
Denial of Access Extension (non-damage) policies may cover you if you’re prevented from accessing your property. This could be due to an event, or by the actions of a competent authority, which could cause your business interruption cover to engage.
If covered by this clause, there are often very subtle differences in wording in your policy. This could depend on the insurer or policy. You may well be covered, but it will depend on your particular circumstances, and the specific policy wording.
It’s clear that the Government needs to do more in ensuring there is clear messaging for businesses, and to help the insurance market look after policy holders. This is an unprecedented situation, and with many people looking to claim on their insurance, we’re already seeing major delays which could have a domino impact.
People throughout the world are understandably facing all kinds of worries because of the current pandemic. Our ways of living have changed, and many business owners will not have experienced a situation like this in their life times. If you own a business and are unsure about whether you can claim for business interruption, or are confused about ambiguous wording, get in touch with a loss assessor.
These claims are not simple, but loss assessors will be experts in business interruption insurance, and will specialise in large and complex claims. They will be able to help and guide you along the way, check your wording and work on your behalf to make sure you get everything you are entitled to.
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