Why Being Employed or Self Employed Matters for Home Owner Secured Loans, Mortgages and Remortgages?

Are you looking for secured loans, mortgages or remortgages?

If so, one of the most important considerations that a lender will take into account is whether you are employed or self-employed. Lenders treat these two types of applicant very differently, particularly with regard to how you go about proving your income.

If you are one of the four million self-employed people in Britain you may already have experienced how tricky it can be to be approved for a loan. It can also be difficult if you work on an employed basis, particularly if your income is made up of a lot of bonus or commission payments.

Home Owner Secured Loans, Mortgages and Remortgages

A home owner secured loan allows you to raise cash based on the available equity in your home. As its name suggests, a home owner secured loan is secured against your house. Depending on the amount of equity in your home, you can choose the term of the loan and the amount you wish to borrow.

Home owner secured loans are different from ‘unsecured loans’ as the lender takes a legal ‘charge’ over your home. This means that you have to keep up repayments on your home owner secured loan otherwise the lender can go to court to force you to sell your home.

Mortgages and remortgages work in much the same way. You take out a loan based on your income, expenditure, credit standing and the equity in your property. The lender takes a legal interest in your home which they can exercise should you not keep up the repayments on your home loan.

Home Owner Secured Loans, Mortgages and Remortgages: What You Should Know If You Are Employed

It is often easier to obtain a home owner secured loan, remortgage or mortgage if you are employed. This is because your income is expected to be more regular and secure as you will be paid on a weekly or monthly basis.

A lender can also prove your earnings much more conclusively if you are employed. You will be able to provide payslips, a P60 or an employer’s reference confirming exactly how much you earn.

However, if you have a low basic salary and earn much of your income through bonuses or sales commission, some lenders will only take a proportion of this income into account. They will argue that as the income is not guaranteed, it could end at any time (even if it has been paid on a regular basis).

Home Owner Secured Loans: What You Should Know If You Are Self-Employed

It can often be difficult to obtain a remortgage, mortgage or home owner secured loan as a self-employed person.

Firstly, proving your income isn’t always easy. If your business has been trading for less than around 18 months, you may not yet have formal accounts, which show the profits, and earnings you have made.

Additionally, even if you do have company accounts they may not truly reflect your personal earnings (for example, you may have elected to reinvest a lot of profit back into the business rather than drawing it as income).

Whatever your employment status, the key is to keep as much information and as much proof of your earnings as you can. The more proof you can provide to a home owner secured loans provider, the better the chance of you obtaining the loan you need.

To use your home to raise money at a competitive APR, please fill this homeowner loan form.