Young Self Employed No Accounts And No Savings. How Did I Get A Mortgage
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
How I Got a Mortgage as a Young, Self-Employed Individual Without Accounts and Savings
Introduction
About four years ago, I faced significant challenges trying to secure a mortgage for my first home. By conventional wisdom, I seemed like an ideal candidate: young, a first-time buyer, and an annual income of around £30k. It should have been straightforward, right?
Well, not quite. Despite my income, I had no savings for a deposit because I was young and inclined to enjoy life. Surely, those 100% mortgages I’d heard about would work for me? Unfortunately, there was more to consider?"I was self-employed with no formal accounts.
The Mortgage Hurdle
Being self-employed with no accounts and savings made getting a mortgage nearly impossible. Every High Street lender turned me down, including my own bank, which knew my financial situation well. They knew I could manage the monthly payments, but that wasn’t enough.
Discovering Self-Certification Mortgages
That's when I discovered Self-Certification Mortgages. These allow you to declare your ability to repay the loan, shifting the responsibility from the bank to you. Typically, banks determine eligibility based on a fixed multiple of your salary, often requiring a small deposit (around 5%) as proof of seriousness.
For self-employed individuals without regular monthly incomes, this traditional approach doesn’t work. I realized self-certification was about assessing my own ability to repay. If I could manage my business, taxes, and invoices, I could determine my mortgage affordability.
The Self-Certification Advantage
Traditional mortgages rely on past income, but self-certification mortgages focus on future potential, allowing individuals like me to make predictions based on our own business assessments. While both salaried employees and self-employed individuals face uncertainties, self-certification gives the control to you.
The Catch
I was concerned about high interest rates or hidden penalties but learned something crucial. Though many lenders exist, very few are actual lenders?"the rest are intermediaries managing the process. A smaller lender approved my mortgage, and interestingly, it was identical to what High Street lenders offered, just judged differently.
The significant catch with self-certification was a 15% deposit requirement. This was far higher than traditional mortgages but understandable to show commitment. However, without savings, I had to get creative.
My Solution
Desperate for homeownership and confident in my ability to manage repayments, I took out a personal loan before applying for the mortgage. Coupled with a timely invoice payment, I managed to cover the deposit and essential refurbishments, like roofing and plumbing. This approach is unconventional and risky, but I was fortunate with rising property values, which quickly exceeded my combined mortgage and loan.
Conclusion
For me, getting on the property ladder was crucial. Exploring beyond the High Street revealed financial products with fewer hurdles. While traditional avenues made me feel inadequate, the right approach showed me possibilities.
Even after securing my Self-Certification Mortgage, I consulted an independent financial advisor, who confirmed I had secured a great deal, recommending I keep it long-term.
This experience taught me the value of looking beyond traditional routes to find tailored financial solutions.
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