A Home Loan for the Self-Employed – Banks Are Inconsistent
Among the legions of self-employed people in the UK, there is plenty of frustration over trying to buy a home. A standard home loan for the self-employed simply does not exist, and banks do not seem to be in any kind of rush to create the system that would make borrowing for the self-employed easier and more uniform. To say that banks are inconsistent is to understate the obvious.
Some of what the self-employed are now going through is a direct result of the financial crisis that started nearly a decade ago. That crisis led to a crash in the housing market that, in turn, led to a tightening of consumer credit. But even before the crash, self-employed people did not have nearly as much access to the mortgage market as their traditionally employed peers.
Today, inconsistency rules the day. Where one bank might be very open to offering home loans to the self-employed, another may not be willing to look at them at all. Other options are available, like peer-to-peer lending, but these are inconsistent too. The reality is that the self-employed have to work harder to find loans.
Growing Numbers, a Growing Problem
How hard is it for a self-employed individual to get a home loan? Let us look at some numbers from a Mirror article published on their website on May 3rd (2017). According to author and Personal Finance Editor Tricia Phillips, there are now more than 4.5 million self-employed adults in the UK. That number continues to rise. Still, banks are not keeping up.
More than a third of the self-employed respondents participating in a recent Aldermore survey indicated that they had experienced trouble finding a home lender. This, despite the fact that these business owners collectively produce upwards of £14 billion in annual turnover.
Let us assume the one-third number is completely accurate. That means there are roughly 1.5 million people looking to buy homes as self-employed business owners, people who are struggling to find banks willing to lend to them. That is a staggering number. For high street banks not to make a concerted effort to reach out to the self-employed is surprising.
Others Are Willing
The good news is that there are others willing to go where high street banks are not. Aldermore's philosophy is one that appreciates the willingness of the self-employed to get out there and take risks to build businesses. They enthusiastically embrace the self-employed with mortgages designed to fit their unique needs.
Aldermore is not alone, either. There are challenger banks and specialist lenders who see the potential in the self-employed market and are willing to compete for home buyers. Peer-to-peer lending was mentioned previously as well. This represents yet another opportunity to get a home loan for the self-employed.
We say all that to say this: a traditional home loan for the self-employed is not part of the offerings of a sizable number of high street banks. But that does not mean the self-employed cannot buy their own homes. Purchasing is a matter of looking beyond the high street to other forms of lending that are not afraid of self-employment.
Bear in mind that there are certain things the self-employed can do to make the process of borrowing easier. First among them is compiling and keeping several years of financial information that can be presented to lenders. Second is to make sure that one's credit rating is near perfect. And finally, the self-employed can make it easier to borrow by working hard to make sure the businesses generate steady revenues for more than just a few months.
Mirror – http://www.mirror.co.uk/money/can-you-still-home-youre-10345578
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