Self Build Self-Employed Mortgage
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Self Build Self-Employed Mortgage
Diarmiud explains how a self-build mortgage works if you are self-employed.
Can I apply for a self-build mortgage if I’m self-employed? Is it hard to do this?
You can apply for a self-build mortgage if you’re self-employed, much in the same way as you could for a standard mortgage. If your self-employed accounts are in decent order and the affordability stacks up, you’re good to go.
There are obviously a limited number of lenders to choose from for self-build, so in that sense, it’s going to be a bit trickier. Some may have stricter criteria than others, so it might be a little bit harder to get a mortgage to self-build – which is why it helps to talk to a broker.
What if I only have one year’s accounts? Can I still get a mortgage for a self-build?
In Northern Ireland, no, not at the moment. There are only a handful of lenders, and they typically are going to ask for two years’ self-employed accounts. Some will even ask for three years. So it’s recommended to have that in place before you embark on any self-build process.
There may be some lenders across the water in England who will accept one year’s accounts. I know that Santander, for example, will take one year’s accounts plus an accountant’s reference on a standard mortgage, but they’re not in the self-build market here at the moment, unfortunately.
How much deposit do you need for a self-build mortgage? Are there any differences if you are self-employed?
It’ll vary from lender to lender. Some will ask for 20% or even 25% deposit. If you already own the land, some lenders will allow that as the security deposit, but they will usually want you to have a 10% to 15% cash reserve in the background.
That’s there in case building costs overrun, or other unforeseen circumstances require you to dip into your pocket. It shouldn’t really differ for self-employed people, as long as the affordability is there.
What are the other requirements for getting a self-build mortgage as someone who is self-employed?
They are a little bit more cumbersome when you’re self-employed. So unlike employed people, who usually have quick access to their pay slips, self-employed people usually have to contact their accountant to gather up the documents, which could be time-consuming.
Accountants are often busy or quite difficult to contact. Other than the documents and the length of time you have held your self-employed position, there are no other particular requirements.
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What documents will I need to prepare to prove my income?
It will be your usual two or three years’ tax calculations and your tax year overviews. You could either get those from your accountant or from your HMRC Government Gateway account if you do your own tax returns.
You’ll also need three months’ bank statements in the same way as employed people.
Can I get a self-build mortgage if I’m self-employed with bad credit?
It depends on how bad the credit is. As with any mortgage, bad credit history can hamper an application. Some lenders will not lend at all, or will offer lower Loan to Value ratios. That’ll mean you might possibly have to have a larger deposit or a larger cash reserve in place.
If not, it could take quite a while to get your credit file up to a standard for a lender to accept it. It’s always a good idea to get your credit file in good order before starting the whole process. It’s no different for employed or self-employed people.
As advisors, we could guide you by looking at your credit report. There may be some elements which are quite easy to fix and will boost your score. That could even get you over the line for a Decision in Principle – or certainly put you on the right track.
Can I get a mortgage for a self-build if I’m self-employed and a First Time Buyer?
Yes, absolutely. Many of the self-build enquiries we’ve had through our office in the past few years have been First Time Buyers. Lots of them have been gifted land by their family to build their first home – and we’re able to help in most cases.
There are no real restrictions on First Time Buyers that wouldn’t apply to anyone else. As long as you meet the affordability and lending criteria, you could get the mortgage you need.
How does remortgaging a self-build property work? Any differences if you are self-employed?
You’ll want to remortgage the property as soon as the build is complete, rather than after the deal ends a couple of years later. If you don’t do it straight away, you’re going to be on a higher interest rate. Self-build mortgages tend to have higher rates and also tend to be variable.
The property will need to be revalued once the build is completed, and it may not have the exact value predicted before the build. The general premise of remortgaging is the same, in that you’re switching from one mortgage – the self-build deal – to a new product, either with the same lender or a different one.
If you’re self-employed, of course, you’re going to have to fit the criteria of the lender you’re switching to. It’s important to get these things checked out before you start the process, so you don’t encounter any problems down the line.
How do I apply for a self-build mortgage? How can a mortgage broker help here?
Applying for a self-build mortgage is similar to a standard mortgage, in terms of gathering the documents to prove your income. What’s different is that you’ll obviously need the plans from the architect, to have building control in place, and the costings from the builder. You also need a contingency fund, as we mentioned earlier.
Lenders will always prefer you to have additional cash to deal with problems during the build process. So using an experienced mortgage broker is important, unless you’ve got quite a lot of experience in doing this sort of thing yourself – which most people don’t.
There’ll be enough to contend with during the build process in dealing with builders, local authorities and potentially addressing problems. So having experienced mortgage brokers on your side could be a huge weight off your shoulders.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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