Self-Employed mortgage brokers in Birmingham

Self-Employed mortgages in Birmingham: what to know

Self-employed applicants are not treated worse than employees, but they are assessed differently. Lenders want to see a track record — usually two years of accounts or tax calculations, occasionally one — and they differ substantially in what income they will actually count. Sole traders, company directors and contractors are each assessed on a different basis. For self-employed borrowers in Birmingham, choosing the right lender is often the difference between a comfortable approval and a decline.

• Sole traders are generally assessed on net profit; company directors on salary plus dividends, though some lenders will use salary plus retained profit, which can be far more generous.
• Day-rate contractors are often assessed on an annualised day rate rather than accounts, which frequently produces a much higher borrowing figure.
• Most lenders average the last two years, but some use the most recent year alone. If your income is rising, that difference is significant.
• Aggressive expense claims reduce declared profit and therefore borrowing power. It is worth understanding that trade-off with your accountant well before you apply.

What matters locally in Birmingham

The city centre and Jewellery Quarter have added a lot of leasehold apartment stock, much of it investor-owned. Around it sits a vast belt of interwar semis and Victorian terraces — Kings Heath, Moseley, Erdington, Handsworth, Selly Oak — that supplies most owner-occupier purchases. Selly Oak and Edgbaston carry a large student-let market attached to the universities. To the south and north, Solihull and Sutton Coldfield are distinctly higher-value family markets with larger detached stock. Birmingham also has substantial ex-local-authority housing, and a significant number of buyers using Right to Buy, where the discount is treated by lenders as the deposit but only a limited number of lenders will lend on the discounted purchase price.

• Self-employed and small-business borrowers, who are heavily represented across the city's trade and retail economy and whose accounts need presenting to lenders that use the right measure of profit.
• Student and HMO lending around Selly Oak and Edgbaston, requiring lenders comfortable with multi-let property and article 4 licensing conditions.

Questions worth asking a self-employed broker

How many years of accounts do I need in Birmingham?

Two years is the common requirement. A smaller number of lenders will consider one year, usually with a larger deposit or where you were previously employed in the same line of work.

What income will a lender actually use?

It depends on your structure. Sole traders are typically assessed on net profit, company directors on salary plus dividends, and some lenders on salary plus retained company profit. Contractors are frequently assessed on an annualised day rate.

Do I need my accounts signed off by an accountant?

Most lenders accept SA302 tax calculations with the corresponding tax year overviews from HMRC. Some also want accounts prepared by a qualified accountant, particularly for limited companies.

Can I get a mortgage in my first year of trading?

It is difficult but not impossible, especially if you moved from employment into self-employment doing similar work. Expect a narrower lender pool and a larger deposit requirement.