Helping the Self-Employed Secure their Future
By Peter Caldicott, Key Account Manager – Principality Building Society
With the UK economy going through a turbulent economic period, there are one group of workers being hit harder than most – the self-employed.
Self-employed workers income are being affected by rising costs, inflationary pressure and the cost-of-living crisis combined with the rise of a gig economy and reduced government intervention massively affected income, spending power and affordability.
These financial pressures have led to sharp decrease in the number of self-employed people from 5m to approximately 4.2m (ONS). The dominant cause, the sector is an ageing one with many deciding to retire early during/post pandemic. Secondly, many self-employed workers have left the sector to return to regular employment and find stability in uncertain economic conditions.
The challenge for societies like Principality is how to help these workers with unpredictable incomes get on the housing ladder, how does a lender adapt its criteria and mortgage products to help self-employed workers, reducing the barriers they face and provide suitable homes.
Principality Building society has adapted its mortgage lending criteria to ease the income evidence requirements for self-employed workers.
The society’s criteria for self-employed and different income types aims to break down barriers providing more flexible income requirements to the different categories of self-employed workers including;
Newly Qualified Medical Professionals can apply with their offer letter which just needs to list a start date and annual salary. Greater flexibility is also provided to medical professionals who are working as Locums, borrowing is calculated using just the last 6 months of invoices/remittance slips. There is also improved criteria in place for Bank Nurses who now require just six months proof of income for applications.
Principality has developed its lending criteria to better service both labour only and day rate contractors. Labour Only Contractors can apply for mortgage products if they have had no more than two employers over a 12-month period. Alongside this, only 1 years’ worth of accounts are required for all applications. Day Rate Contractors are also provided with greater flexibility and now just require at least 2 years industry experience to apply for mortgage products. The only requirement needed is to provide a copy of their latest contract with a minimum annual income of £50K.
Supply Teachers who apply for mortgage products only need to provide 6 months proof of income to support their application.
Business Owners and Partners
Company directors, sole traders and partners receive greater flexibility applying for Principality mortgage products. Partners in a large firm with multiple partners simply require written confirmation of income from the company accountant, finance or managing director.
Limited Company Directors with over 33% shareholding can apply for mortgages with two years accounts (the most recent needs to be less than 18 months old) or an accounts certificate prepared by a qualified accountant. Salary & dividend income is also accepted.
For up to 75% LTV last figures can be used for affordability and for cases above 75% an average of the last two years income is used.
If a borrower has a shareholding in a business of up to 33%, they can be treated as employed rather than self-employed using just one bank statement and wage slip to support affordability. Dividend income can also be added to this figure if received over the past two years.
Lastly, Sole Traders can apply with just two years HMRC tax calculations, SA302 or online tax assessments supporting by the corresponding tax years overview (this documentation must include the customer’s name, unique tax reference and HMRC logo).
The Society also offers support in several aspects for self-employed applicants by:
- Accepting up to four applicants per application using all four incomes for affordability.
- Up to 5.5x income for newly qualified professionals
- Lending for up to age 75 for earned income.
- Continuing to listen to customer and broker feedback to develop products and propositions to suit their customer’s needs.
- Continuing to introduce new products through MSO (Principality’s online intermediary application portal).
A common-sense approach to lending
If you’ve a case relating to self-employed applications that needs a common sense approach to lending get in touch with your local BDM or contact our broker support team on 0330 333 4021 or visit https://www.principality.co.uk/Intermediaries
For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.