An important part of the mortgage application process is evidencing your income over time, such as your last three month’s payslips from your employer. However, for the 4.2 million self-employed individuals working in the UK*, how do they then prove their income history to obtain the right mortgage for them without being charged extra for alternative solutions?
Our client, James, came to us looking to refinance the mortgage on their second home as their fixed rate was expiring. They also wished to raise some additional funds to carry out improvements, however, he did not plan to start work on the property for another six months. Due to these factors and the level of savings the client held, we decided an offset mortgage would be most appropriate.
James is an equity partner in a successful law firm, therefore the key issue we faced – which many of our self-employed clients will be familiar with – is that the accountant who handles the tax returns for all of the firm’s partners does not submit them until January. Most lenders require the most recent tax return evidence to be no more than 18 months old, meaning the time between 5th October, when the previous year’s tax return is 18 months old, and January, when most accountants file tax returns, can leave people in a difficult position where they lack the income evidence most banks require.
To resolve this issue, we had two options. Firstly, we could ask the accountant to submit the tax return early, which James was reluctant to do. Alternatively, we could use a specialist lender who would be open to relying on the older documents, which can come at a higher cost due to the type of bank required.
We then approached a private bank who are more flexible with their criteria and, given the strong track record of the client, were happy to lend based on historic income evidence and bank statements alone. Additionally, due to our strong relationships with private banks, we managed to get the bank to price match the very best offset deal available on the high street, thereby ensuring our client achieved exactly what they needed, without having to wait, and without the premium price tag.
Everyone’s situation can differ based on your income, employment status and the savings you have, for example. Therefore, it is important to seek the advice of an experienced Mortgage Broker to find the right deal for you.
In the case of Gladstonei365 Mortgage Brokers, we have strong relationships with a wide range of lenders and private banks, which many other brokers may be lacking in. To discuss your own mortgage arrangements please do get in touch with one of our mortgage advisers on 01872 306411.
*Source: 1. D. Clark, Statista, 2023