As a self-employed person it is not always easy to get a mortgage. With many traditional banks you get a “no”. Why does this happen to you and what can you do about it? What are the mistakes you should not make? We tell you all about it in this article.
Being self-employed has its risks
As a self-employed person you never know in advance what the future will bring. Entrepreneurship means taking risks. Not only commercial risks, but also financial risks. And the banks know this too.
That’s why lenders are more cautious before giving you a mortgage. Banks want to get an overview of your business as a self-employed person. What is your turnover? Do your customers pay on time? Are you behind in paying your social security contributions or taxes?
How long does it take to be self-employed to get a mortgage?
Especially as a self-employed person starting out, you will always have to look for new customers and thus turnover. As this period is full of uncertainties, a lender will not be inclined to give you a mortgage.
A lender prefers stability when granting a mortgage. That is why they ask you to have several years of experience and to be able to show a change in your figures or income.
Most traditional banks require 36 months’ experience. If you choose an independent mortgage broker, such as Hypothèque.be, you will find that lenders only require 24 months’ experience. This means you can get a mortgage faster.
What will the bank look at when assessing your income as a self-employed person?
The income of a self-employed person can fluctuate. One month is not like another. That is why a lender will look for a reliable overview of your income. Often they will look at your latest statement from the roll. After all, this is the income you have officially declared.
In addition, an up-to-date view of the details of your figures can also help to reassure the lender who will be judging your mortgage.
After all, a lender needs to be able to ascertain that you can repay your mortgage as a self-employed person.
Self-employed people and mortgages
If you are interested in becoming self-employed in a secondary occupation, you now know how the lender will assess your mortgage. They will look at your income in the same way as a main self-employed person. Only now you have the advantage of working as an employee. This of course reassures the lender when assessing your loan application.
What to do if you are self-employed and you are looking for a mortgage?
No one can change the way a credit application analysis should go. A credit agency looks for stability and examines the ability to repay. You should therefore take the above factors into account.
1. Your spouse has a professional income
Naturally, it will help if your spouse has a professional income. This additional income will allow you to go a little further. In this article you can read about how Marijke and her partner managed to get a mortgage to buy their flat.
2. You already have money set aside
It also helps if you are independent and can put money aside. This will enable you to make your own contribution if you want to buy a property.
3. Your parents help you and give you money
Don’t have a contribution to make? Perhaps your parents can help you by giving you money so that you can make your own contribution. If your parents have no money, but still want to help you, find out what your options are.
4. Your parents are willing to give their house as collateral
When your parents are willing to give their house as collateral for your mortgage, this opens up many possibilities for you. Please contact us to find out what this means for you.
What are the mistakes to avoid when looking for a mortgage?
In our experience, we often find that some self-employed people make a few costly mistakes when looking for a mortgage.
Investing all your savings in your business
Starting a self-employed business naturally requires (working) capital. You can invest this capital yourself with your savings, but also through third parties (family, win-win loan or via a loan). If you invest all your savings in your business, you will not only have no more reserves, but also no money to buy a house.
1. Increase your ‘salary’ quickly.
When it comes to assessing your ability to repay (https://www.hypotheek.be/nl/blog/hoeveel-van-je-inkomen-kan-je-lenen-voor-een-woonkrediet), many self-employed people say that they will increase their ‘salary’ from next month in order to be able to repay their mortgage. As you can read above, a lender will look for what is stable. A higher salary from next month onwards will not be enough to prove this.
2. From supplementary self-employment to main self-employment
You are already self-employed in a supplementary capacity and you decide to take the step to become self-employed on a principal basis. If you do this before you have obtained your mortgage, you may have difficulties in proving your ability to repay.
3. Make more deductible expenses to pay less tax
Self-employed people are sometimes advised to “incur expenses” in order to pay less tax. OK, there is some truth in that, but think twice before making those expenses. What good is a nice car when you would have been better off investing it in your own home?
Want to know if you can get a mortgage?
You see. Every situation is different. That’s why your situation needs customisation. No “one size fits all”. Are you self-employed and looking for a mortgage? Then make an appointment with one of our credit specialists. Fill in the form and describe your situation. We will be happy to help you.