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Difficulty of getting mortgages for freelancers
Thread poster: xxxLucyPatterso
xxxLucyPatterso
English
May 5, 2008

I live in the UK and am saing up to buy a flat in the next year or so. The main worry I have is whether I will even be able to get a mortgage.

I have been working as a freelance translator for almost a year and know I have a regular enough income (with savings to back me up) to afford the repayments - but will banks take my word for it?


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Luisa Ramos, CT  Identity Verified
United States
Local time: 12:00
Member (2004)
English to Spanish
Tax forms May 5, 2008

Here in the U.S. you'd be asked to produce your income tax forms (as independent consultant or for professional services rendered) and any other reliable documents attesting to your solvency.

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Charlie Bavington  Identity Verified
Local time: 17:00
French to English
It won't be easy May 5, 2008

As you're self employed, the mortgage will probably be what they call "self-cert" (=certified, I think), i.e. instead of having an employer tell the bank your income, you tell the bank, and they take your word for it (altho you do sign a declaration that the info you provide is true).

Trouble is, self cert mortgages are considered risky by lenders, so there are not many around any more, and there may be a (quite low) cap on the max you can borrow. In this climate, you may not have a vast array to select from, and you'll probably need a substantial deposit.

I'm not sure how adverse only being self-emp'd for a year will be, but it won't help your case. I got a mortgage last year, and despite 4 years self-employment over here, they were still a bit funny about it, possibly 'cos I don't have an accountant. That may make a difference.

Go see a mortgage advisor or two - they'd probably be happy to have someone to talk to these days


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Samuel Murray  Identity Verified
Netherlands
Local time: 18:00
Member (2006)
English to Afrikaans
+ ...
My sister... May 5, 2008

LucyPatterson wrote:
I live in the UK and am saing up to buy a flat in the next year or so. The main worry I have is whether I will even be able to get a mortgage.


My sister is an actress and her husband is a motivational speaker. They got a home loan at a time when neither of them had fixed income. They claim that it's all in the presentation, but I think they just got lucky... and they bought their second home when they still didn't have a fixed income (without selling the first one).


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Marijke Singer  Identity Verified
United Kingdom
Local time: 17:00
Dutch to English
+ ...
I have a mortgage in the UK May 5, 2008

I am a single parent with 2 children and they gave me one. But I did have substantial savings (30% of the value of my home). I also have an accountant and I've been doing freelance work for 25 years (with records to prove it). They were queueing up to give me a mortgage. Do shop around.

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Madeleine MacRae Klintebo  Identity Verified
United Kingdom
Local time: 17:00
Swedish to English
+ ...
Are you UK based? May 5, 2008

Your profile doesn't specify which country you live in (and BTW being a translator with only English (monolingual) under working languages is a bit strange).

But if you live in the UK, this is not the time to try buying or getting a mortgage. Reasons:

1. Prices are likely to fall further so why buy in a falling market.
2. Interest rates you'll be offered now (credit crunch, scared banks, etc.) are well above interbank rates.
3. And being self-certified, the rates you're offered will be even worse than those offered to ordinary employees.

My advice is: sit it out for now, maybe until second half next year.

I and my son are staying put in our, not too great rented, flat for now. And I'm employed as well as a freelancer and have at least 10% to put down) - so reason 3 is immaterial.


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Joan Berglund  Identity Verified
United States
Local time: 12:00
French to English
UK may be different than the US May 5, 2008

But here banks like to look at at least two years of freelance income, and I am sure they would prefer even more. Do shop around, but it is possible you may have to wait another year, see what kind of feedback you get. Another year really isn't that long, and it will give you more time to save for your down payment. I know real estate has skyrocketed in the UK in the past few years, but it was doing that here in the US as well, and now look where we are. You may well be better off having to wait. Do make sure you are keeping up your books so you can show them profit and loss statements, and you will probably have to show tax statements, we do here. There is such a thing as a "no doc stated income loan" but that was a major cause of the current mortage default crisis, so banks aren't too generous with those anymore. UK banks are probably more than willing to take a lesson from the US experience.

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Madeleine MacRae Klintebo  Identity Verified
United Kingdom
Local time: 17:00
Swedish to English
+ ...
Sorry about my the titelof my last reply May 5, 2008

Reading more carefully, I can see that you say you live in the UK.

Anyway, my advice is still the same - this is not a time to buy in the UK unless you really have to.


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Madeleine MacRae Klintebo  Identity Verified
United Kingdom
Local time: 17:00
Swedish to English
+ ...
Sound similar to UK "self-certified" May 5, 2008

Joan Berglund wrote:
"no doc stated income loan"


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Sanmar
United Kingdom
Local time: 17:00
English to Dutch
+ ...
Three years accounts May 5, 2008

I got a mortgage with a mutual building society in the UK based on my income alone and a 10% deposit. However, they did want to see 3 years accounts in my case. I do agree with some of the other posters above that now may not be the time to buy in the UK. House price falls of at least 15% by the end of 2009 are predicted by various experts and some think house prices may fall even further than that. If I were you, I would try and save up as much as possible and then, hopefully, take advantage of the lower house prices in the not-too-distant future.

[Edited at 2008-05-05 17:48]

[Edited at 2008-05-05 17:49]


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Joan Berglund  Identity Verified
United States
Local time: 12:00
French to English
see, I didn't know the UK was in a housing slump already May 5, 2008

I actually thought you would be a few months behind us. Yes, I think waiting another year may well get you a better price, mortage rate and you will have a bigger down payment.

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Madeleine MacRae Klintebo  Identity Verified
United Kingdom
Local time: 17:00
Swedish to English
+ ...
Maybe I'm just a pessimist May 5, 2008

Sure. We're somewhat behind the US when it comes to bad financial news. But last month (April) saw the first year-on-year fall since the 1990s.

Joan Berglund wrote:

I actually thought you would be a few months behind us. Yes, I think waiting another year may well get you a better price, mortage rate and you will have a bigger down payment.


The UK might be in a slightly better situation than the US, but the offered interest rates, and conditions, have seriously deteriorated during the last few months.


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Sonia Hill
United Kingdom
Local time: 17:00
Italian to English
UK mortgages May 6, 2008

My husband and I took out a mortgage in the UK last year. Despite having records to prove 5 years of self-employment in Italy, followed by 2 years self-employment in the UK, the bank refused to take my earnings into consideration and only gave us our mortgage on the basis of my husband's earnings.
The bank said I could only be considered for a mortgage once I had been self-employed for at least 3 years, with accountant's records to prove it.

As other people have said, the mortgage market in the UK is very bad at the moment too. If we had left it any later, we would definitely have stayed in rented accommodation for a while as house prices may well fall.

If I were you, I would keep saving for a couple of years and look at the situation then. Once you have been self-employed for three years, with a good income, the banks should be fairly receptive to you.



[Edited at 2008-05-06 07:12]


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Stuart Dowell  Identity Verified
Poland
Local time: 18:00
Member (2007)
Polish to English
+ ...
Ask banks / mortgage brokers May 6, 2008

Probably each bank will have slightly different rules as to how they establish income and therefore creditworthiness.

My advice would be to get a list of banks that offer the type of mortgage you are interested in (maybe with the help of a mortgage broker) and then gather information on their lending criteria.

Any other way and you are just dealing in "ifs" and "buts".

Regarding the economic climate and prices, the other posters are reflecting the current sentiment in the media. They may be right; however, nobody knows what will happen in the future.


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Charlie Bavington  Identity Verified
Local time: 17:00
French to English
Mortgage advisors May 6, 2008

You know how sometimes on here we see questions along the lines of "an agency has asked for mY social security number - why?" and the usual answer is that because they have some requirement that, in their particular country, is met perfectly by that number, whereas the same cannot be said elsewhere.

Sonia Atkinson wrote:
The bank said I could only be considered for a mortgage once I had been self-employed for at least 3 years, with accountant's records to prove it.


This is same kind of thing. Their actual requirement (as explained to me) is to have someone that THEY trust go on record as stating that your income is £xx,xxx and has been for a while. Hence, if you're employed, they take your employer's word for it. AFAIK, lenders don't actually see the accounts. In fact, I'm not sure they are actually allowed to see too much info - othewise they would just ask HMRC for your last 3 tax returns and that would establish the situation beyond doubt. So, anyway, the easiest way to express this requirement is to tell self emp'd people they "need" (sic) 3 years of accountant's records. They don't. I got a 90% mortgage last year and have never been near an accountant!

However, Sonia is absolutely right to strike a note of caution, and it also shows that shopping around can get you different answers.
Might also be worth pointing out that it was last year, 12 months ago almost exactly, and procedures have probably tightened up since then.
The best advice is really - ask around


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