If you are self-employed and dreaming of owning a home, the Shared Ownership scheme might offer a practical option if you are a first time buyer looking to get on the property ladder. Generally designed to help those unable to afford the full purchase price of a home, this choice allows you to buy a share and pay rent on the remainder.
For self-employed individuals, it might seem challenging to secure a mortgage, but it is achievable. Here, we will look at how you can proceed through the process as someone who works for themselves.
Guinness Homes is proud to provide award-winning Shared Ownership and private sale homes in areas you want to live.
How Shared Ownership works
Shared ownership is a government-supported scheme. It allows people to buy between 25% and 75% of a home and pay rent on the remaining share. This combination can make home ownership more affordable compared to buying outright with the potential to get on the property ladder especially for first time buyers.
You can also increase your share over time, a process known as ‘staircasing,’ until you potentially own 100%.
Shared Ownership eligibility
Before looking further, check if you qualify:
- You must be over 18 years old and a resident in the UK.
- Your household income is £80,000 or less (or £90,000 in London).
These criteria apply to most applicants, including those who are self-employed.
Self-Employment challenges
Individuals who run their own businesses face unique challenges when applying for a mortgage. Lenders typically want proof of steady income, which can be more difficult to demonstrate without a regular salary or payslips. Lenders examine your financial history to assess risk.
If you are self-employed, you need to prepare:
- Tax returns (SA302 forms from HMRC) for the past 1-3 years.
- Accounts prepared by a certified or chartered accountant.
- Evidence of work continuity (contracts or future revenue).
This paperwork helps show your income and financial stability to lenders.
Credit and approval for Self Employed
A healthy credit score is essential. Lenders will scrutinise this to evaluate your lending risk. They will also require a deposit, usually at least 5-10% of the property’s share price you aim to buy.
The mortgage application process ca be a challenge but there several ways to help improve your success:
- Organise Your Finances: Make sure your financial documentation is current and well-organised.
- Build a Strong Credit Profile: Pay off outstanding debts and manage your credit wisely.
- Consult an Adviser: Speak with a mortgage adviser who knows about shared ownership and self-employment.
- Save a Bigger Deposit: A larger deposit can lower lender risk, improving approval chances.
Finding a lender experienced with self-employed applicants is important. They can better recognise the fluctuations in your income and assess your situation fairly. Some lenders have specific mortgage products for self-employed individuals.
How to apply for Shared Ownership
The application process includes several steps:
- Check Eligibility: Verify that you meet the criteria for the shared ownership scheme.
- Choose a Property: Search for properties through our developments, housing associations or property portals.
- Apply: Submit your application with all required documentation, including proof of income and credit history.
- Secure a Shared Ownership Mortgage: Once you receive conditional approval, apply for a mortgage to cover your share.
- Legal Process: Engage a solicitor to handle legalities like contracts and property searches.
What is Staircasing?
Once you’ve settled in, you might aim to increase your ownership over time—this is staircasing. Benefits of staircasing include:
- Lower Rent Payments: As you own more, the rent you pay on the remaining share might decrease.
- Full Ownership: Eventually, you may own the property outright.
Higher ownership might require additional mortgages or savings, so plan this stage carefully.
Managing financial fluctuations
Self-employment can bring income changes. To manage this, consider:
- Building a Buffer: Maintain a reserve savings account to handle any slow periods.
- Budgeting Strictly: Keep a tight rein on your finances to meet mortgage and rent obligations without stress.
Final thoughts
People often believe that being self-employed can block property ownership. That is a misconception. Many successfully secure mortgages while self-employed by demonstrating income stability and sound financial management.
Buying a shared ownership property can seem challenging, especially if you are self-employed. Yet, with careful preparation and knowledge, it becomes a feasible option. Prepare your financial statements, build good credit, and consider professional advice to navigate this process smoothly. Choose lenders who understand and appreciate the details of self-employment. With careful planning and persistence, you can achieve home ownership, balancing your work flexibility with the security of a place to call home.
