Self Employment: Can I Get A Mortgage & Find A Reasonable Insurance Policy?
Sounds like the ideal scenario, doesn’t it – being your own boss. No one to answer to. Keeping to your own rules and regulations. Working your own hours – and hours to suit, to boot.
If that ‘Monday morning feeling’ is starting to hit you on a Friday evening, then maybe you need to start considering the idea of going self-employed. We’re certainly finding that more and more people are approaching us with queries about exactly what being self-employed entails, so it looks as if the current self-employed sector of 120,000+ is on the increase.
As with any changes in your lifestyle, of course, you need to consider the fallout.
How will self-employment, for example, affect your chances of getting a mortgage? What would happen if you took ill? How would you pay your bills if you were unable to work? Those are just a few of the questions that you would have to consider.
Mortgages for self-employed people
At Crawford Mulholland, we often hear people speak negatively about not being able to get a mortgage, or not being able to remortgage once they become self-employed. Nothing could be further from the truth. We know for a fact that there are many lenders who will happily give you a mortgage. Usually the main proviso is that you need two years’ accounts.
If you’ve just set up a business and don’t have two years’ accounts, however, the door isn’t closed to you. Halifax, for example, will lend based on one year’s accounts: a real game changer for those who don’t have the luxury of waiting for two years.
Among those lenders, who will offer a mortgage to self-employed people, however, terms and conditions tend to vary.
Most lenders will take the average of the two years’ income and lend based upon that figure.
So if, for example, in your first year you made a net profit of £12,000 and in your second year you made a net profit of £32,000, most lenders (in the example below we used Barclays) will take the average of your two years and offer you a mortgage of up to £99,000.
Santander however will lend based on the second of your two years. So, if you had a tight first year or had a lot of initial overheads, then Santander would lend you £144,000 based on the same two years’ income figures above.
If you opt to go directly to a bank, building society or other lender, you can be assured of getting the best deals that they have available. At Crawford Mulholland, however, we strive to ensure that you have the widest range of great deals available across the market to choose from. You also have the added benefit of our years of experience and market knowledge.
Providing for your loved ones
When it comes to providing for your family or paying your bills if you’re unable to work due to illness or injury, then we can take the worry out of that scenario for you. When you’re self-employed, income protection is vitally important.
Income protection is a type of insurance that pays out a tax-free monthly sum if you’re unable to work due to accident or illness. This ensures that you are able to maintain your standard of living and replace part of your income until you are able to return to work, or until the end of your policy term.
The three most common claims are for:
- muscular skeletal injury 35%
- mental illness (stress, anxiety, depression) 21%
- cancer 14%
How much protection does it offer?
Income protection is paid out monthly until you are able to return to work and typically you can insure approximately 60% of your gross salary free of tax. The cost of your payments is based upon a variety of factors including: age, health, and occupation if you’re a smoker.
For many, this is a great way to not only give you financial security in the event of an adverse event or serious illness, but will also give you peace of mind, which is equally important.
Obviously, deciding whether or not to take out income protection is a personal decision for you, and it’s certainly very much dependent on your circumstances and financial situation.
But just take a look at the facts….
Research has shown that 24% of families would seriously struggle with no savings put aside for a ‘rainy day’, while 45% of families would run out of money after less than one month.
Could YOU survive?
Give us a call today and make an appointment to have a no-obligation discussion with one of our Belfast mortgage advisors. Let us help you with your journey into self-employment and all that that entails.
