You’ve decided to turn your passion for fashion and beauty into a career. You’ve got your products and services sorted, you’ve created a website and you’re ready to start earning. Thanks to a dash of luck and a lot of hard work, you eventually turn your business into a moneymaking venture. For all intents and purposes, you’re now part of the 4.8 million people in the UK who call themselves self-employed.
As an independent earner, the first financial hurdle you’ll need to overcome is tax. Filing your own returns is a daunting task for any newbie. However, once you’ve done that, you’ll soon encounter another potential stumbling block. Getting a mortgage as a self-employed individual is typically harder than it is for those in full-time employment.
Because your income can fluctuate, lenders are often more cautious when assessing self-employed applicants. Fortunately, even though it might be slightly harder, it’s not impossible. As long as you have a strategy, you could use your beauty business to buy your dream home using the following tips.
Play the Waiting Game
As well as giving yourself time to save and, moreover, solidify your business, applying for a mortgage as a self-employed individual requires time. As a standard, lenders will want you to have at least three years’ worth of accounts before they’ll consider your application. They ask for that much data because it allows them to calculate your average earnings. Additionally, most businesses don’t last more than two years. Therefore, if you can prove you’ve got a stable business, you stand a better chance of getting some money.
Know the Market
Knowing the lenders and what they offer is crucial. Without understanding the products available, you’ll never know what to aim for. By using an online broker, you can get a much better insight into the market. Indeed, a company such as Trussle not only provides a mortgage calculator but data on the top lenders. For example, as stated by Trussle, a Coventry mortgage could be worth 5X your income before tax.
Although 5X isn’t uncommon, the “before tax” condition is great if you’re self-employed because it means you don’t have to worry how your business expenses will affect your borrowing potential. Of course, all lenders will have their own views on self-employed applicants. However, simply learning the facts before you start applying will improve your hit rate.
Do It By the Books
The best way to improve your chances of getting a mortgage is to have the best-looking books possible. In other words, make sure your accounts are in order and showing your earning potential in the best light. Naturally, you need to make sure your books are accurate and up-to-date. Consistent recordkeeping is the easiest way to do that. But, if you really want to give yourself the greatest shot of banking some cash, hire a professional.
A certified or chartered accountant will often find areas where you can save money or plug any financial holes. For instances, one area where new business owners make the most mistakes is expenses. An experienced professional will know exactly what you can and can’t claim for. This can help you reduce your tax bill and, in turn, show better profits to the lender. Naturally, this isn’t a sure-fire to get a loan. In reality, there are no guarantees when it comes to borrowing. However, when you’re self-employed, it’s important to get an edge any way you can.