Fri 23 Feb 2024

Unlocking Homeownership for Self-Employed Workers

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Homeownership is a common aspiration in the UK, with many people looking to secure a place they can truly call home. However, recent research shows that a significant number of self-employed individuals are reluctant to take the plunge into the mortgage application process. A staggering 34% have never applied for a mortgage, with fear of rejection leaving them trapped in an endless cycle of renting. Read on to find out more about what’s stopping self-employed workers from realising their dreams of homeownership and how these challenges can be overcome.

Fear of rejection

Research shows that 30% of self-employed individuals avoid applying for a mortgage due to the belief that they would be rejected. Additionally, 26% believe that securing a mortgage is more challenging for those with non-traditional income sources. The fear of being turned down for a mortgage is creating a real barrier for self-employed workers who dream of owning their own home.

Understanding self-employed mortgage barriers

Fear of rejection is a key reason why self-employed people are avoiding the mortgage application process. However, it’s not the only reason. 36% say that the lack of a sufficient deposit is stopping them, whilst 17% are waiting for interest rates to decrease, aiming for more affordable mortgage payments.

Additionally, 10% find the whole process too daunting, revealing the psychological toll the process can take. 15% of self-employed workers said they lacked the necessary documentation to prove their income due to their businesses being less than two years old. This highlights the importance of specialist lenders who understand the complexities of self-employed finances and are prepared to assess income differently in order to make mortgages more accessible.

Self-employed success stories and setbacks

Whilst securing a mortgage can be challenging for self-employed people, it’s certainly not impossible. Indeed, a considerable 57% of those who applied were successful. 15% of these applicants initially faced rejection, demonstrating the need for determination and resilience, as well as expert assistance from specialist lenders. Currently, 4% are still navigating their journeys to homeownership. The reasons behind initial rejections are varied, although by far the most common factor was volatile income, with 38% citing this challenge.

The role of specialist lenders

Don’t make the mistake of assuming that all lenders are cut from the same cloth. Whilst some traditional mortgage providers remain wary about lending to self-employed people, specialist lenders tend to have a better understanding of the challenges faced by these individuals on their path to homeownership. These lenders are often more flexible, with some accepting 12 months of accounts instead of the standard two years, for example. This can provide a lifeline for self-employed workers eager to get on the property ladder.

Modern lending practices have adapted to accommodate the diverse income streams of self-employed individuals. Lenders now understand the nuances associated with recording your income when self-employed and the various types, including:

  • Gross Company Profit: lending against the gross profit of a company, which reflects its total revenue minus the cost of goods sold.
  • Net Profit: considering the net profit of a company, which is the gross profit minus operating expenses, taxes, and other deductions.
  • Dividends: taking into account dividends received by business owners, which are payments made to shareholders from a company's profits.
  • Directors' Salaries: factoring in salaries paid to directors of companies, which can contribute to the borrower's income.
  • Sole Trader Accounts: reviewing financial records and accounts of sole traders to assess their income and creditworthiness.
  • Construction Industry Scheme (CIS) Vouchers: considering income received by construction workers through the CIS scheme, which involves tax deductions at source.
  • Contract Workers: evaluating the income of individuals working on a contract basis, which may vary in frequency and amount.

By understanding and accommodating these various income sources, lenders make homeownership a tangible possibility for self-employed individuals who may have previously felt excluded from traditional lending options. This adaptability reflects a more inclusive approach to lending, recognising the changing landscape of employment and entrepreneurship.

If you’re self-employed and dreaming of homeownership, it's crucial to recognise that even though the journey may come with hurdles, they can be overcome. Search for houses for sale in Chelmsford and let us assist you in finding your dream home.

If you’re ready to take the next step towards applying for a mortgage, it makes sense to speak to an experienced mortgage advisor. Get in touch with Balgores by calling us on 01245 492 424, or by sending an email to

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