Empowering the Freelance Economy

Which mortgage lenders have tightest restrictions on self-employed and contractors?

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It’s becoming harder to get a mortgage if you’re self-employed, which is nothing new for those that have tried to apply for a self-employed mortgage while the stamp duty holiday is in effect.

However, news that Santander is the latest lender to tighten its criteria for self-employed and freelance applicants is another blow for many of the UK’s 4 million-plus self-employed, contractor and freelance workers. The move comes after a series of banks introduced new lending rules in the wake of the latest COVID-19 lockdown, consumer finance site Which? has reported.

Santander limits self-employed borrowers to 60% mortgages. Self-employed applicants will only be able to borrow up to 60% of a property’s value under tough new rules introduced by Santander. This means you would need a deposit of 40% to get a mortgage – that’s just under £100,000 on an average-priced house, said Which?.

Santander says the changes are “temporary” and have been brought in because of the complexity of self-employed applications.

What are other mortgage lender restrictions?

Halifax: self-employed borrowing is limited to 4.49 times annual income

HSBC: not currently lending to self-employed applicants whose income has been impacted by the recent tightening of COVID-19 rules. Applications will reopen after the lockdown ends.

Nationwide: self-employed applicants can borrow up to 85% LTV.

Natwest: if a self-employed applicant has had a Self-employed Income Support Scheme grant, the proceeds will not be considered as income.

TSB: self-employed applicants can borrow up to 75% LTV. Borrowing is limited to 4.25 times annual income.

If you would like to learn more about the government’s Help to Buy Scheme for the self-employed and contractors, check out our report here.

How to boost your chances to get a mortgage

1) Speak to a mortgage broker

2) Use an accountant

3) Get your paperwork together

4) Save a bigger deposit

5) Make sure your credit report is up to scratch

6) Make sure all applicants are on the electoral roll

[Source: Which?]

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