The coronavirus outbreak blindsided all of us. And the self employed have been hit the hardest. While some may have seen their revenue streams dry up entirely, others are the busiest they have ever been. One thing is certain; the outbreak and associated lockdown can’t last forever, so it might be time to start thinking about what you will do when this is over.
If you’re self employed and thinking about buying a home soon, you’ll know that the requirements are even more complex for workers like you. Getting a mortgage when self employed involves jumping through a lot of hoops, and you might be concerned that the coronavirus outbreak could derail your plans.
Banks have already started issuing warnings of tough times ahead. This could have a knock-on effect on lending attitudes. And let’s not forget that Brexit is still looming large on the horizon. So what are your options as a freelancer? And what steps can you take to make sure you’re in a strong position to get a mortgage? Read on to discover our top tips…
1. Don’t miss any payments
If you are struggling financially at the moment, it’s important to arrange payment holidays rather than missing payments. If you have loans, credit cards or consumer finance agreements which are due to be paid during the outbreak, try to pay them on time. This might be easier said than done when you’re struggling to make ends meet. If you are going to struggle to make a payment, reach out to your creditors and ask for a payment holiday. This shouldn’t impact your credit score, so you won’t be left with any black marks on your record.
2. Keep an eye on your credit score
You don’t want something like a missed payment or bank error to derail your credit score; and your mortgage application by extension. Keep a close eye on your credit score during this time. If you are struggling for money, dip into your savings before you apply for further credit. Making credit applications before a mortgage application is a big red flag for many lenders.
3. Apply for the self employed income support scheme
In April, the government announced plans to help the self employed weather this storm. This is in the form of a grant which will be based on your last 3 year’s trading history. If you are eligible, you will get 80% of our average monthly taxable profits. It will be paid in one lump sum to cover March, April and May. The monthly cap is £2,500, which means you could get up to £7,500. This could help you to stay on top of your bills and living expenses, or it could help to top up your savings if you have been forced to dip into your house deposit savings. This is a grant, which means you won’t have to repay it, but you will have to declare the income on your 2020-21 self-assessment tax return. You can check if you are eligible here.
4. Be ready to apply
Estate agents are predicting that house prices will fall around 3% this year, but then rise by 5% in 2021. Once the estate agents are open and allowing viewings, this could be the ideal time to strike. 3% of a £200,000 property is £6,000. There could be serious savings to be made if you are quick to strike. Make sure you have all of the relevant information about your business and earnings ready to go when the estate agents reopen.
5. Curb your spending habits
There might not be much else to do during lockdown other than browse endlessly on your favourite websites, but try to keep your spending in check. In particular, don’t be tempted by quick and easy credit applications that allow you to pay in multiple instalments. There have been horror stories of individuals missing payments for small items and seeing their credit scores plummet as a result. Try to stick to the necessities during this difficult time and save your shopping spree for when you’ve finally moved into your new home.
6. Skip the bookies
In addition to unnecessary shopping, you should also avoid gambling sites during this time. While there isn’t much going on in the sports world, don’t be tempted by online casinos. You might be bored during the lockdown, but having a flutter could do a lot of damage to your application. Some lenders will reject applications from those with gambling websites on their bank statements. While this is more likely to impact those who spend a lot of money on gambling websites, you should be cautious
7. Work with a broker
The mortgage market is about to get very turbulent. This isn’t a time you want to be navigating solo. Instead, trust the expertise of a mortgage broker to help you secure the best possible deal. No one knows what is going to happen next, but a mortgage broker will be able to point you in the right direction and could save you thousands on fees and interest. While you will have to pay the broker, this cost is often absorbed by the savings you make from finding a better deal. These guys are fee-free.
8. Be flexible
Things are less than ideal at the moment. This could mean that people take their homes off the market, or hold off on listing their home until a later date. This uncertainty means that you may have to be more flexible in your approach to getting on the property ladder. Roll with the punches and try to adopt an open mind to your property hunt. You might not get everything you want, so try to be realistic and flexible.
9. Don’t give up too easily
Just because you are rejected by one lender, it doesn’t mean that you will be rejected by all lenders. Don’t give up too easily, and try applying again in 3 months if you aren’t successful the first time. If you have income, a healthy deposit and a clean credit history, there should be no reason you can’t secure a mortgage with the right lender. Sometimes, it’s just a case of trying to find the right one.
10. Be prepared for further disruptions
Coronavirus isn’t going anywhere anytime soon. It’s something we will have to live with for a while, so be prepared for further disruptions. While lockdown measures could soon be lifted around the world, they may need to be reinstated if there are further spikes. Be prepared for this to derail your mortgage application and home purchase again in the future. If you aren’t in a hurry to move, it might be a good idea to wait until the housing market is more stable before making a big financial commitment.