Andrew Turner, chief executive at specialist buy to let broker Commercial Trust Limited, looks at how a change in circumstances can impact on a buy to let mortgage application.
Whether you are employed, self-employed, a contractor, receiving benefits or retired, many lenders will want to see some proof of your personal income, aside from prospective rental income from a buy to let investment.
In most scenarios, you will need to provide proof with pay slips, P60s, SA302s or other accounting documentation that the lender wishes to see as proof of earnings.
In the case of self-employed applicants, many lenders will want to see two or three years of accounts.
Similarly, for contractors, the waters can become murkier when it comes to proving you have a regular income – the majority of lenders will want to see proof of a continuous 12 months of earnings. Others will ask for six months of earnings, for example, in the case of a change of job. With contractors, it can be helpful if you have moved from one company to another within the same industry.
More challenging cases
At Commercial Trust Limited, we work closely with a wide range of lenders, with varying approaches to risk assessment and underwriting.
In most buy to let applications, no two sets of circumstances are the same and the advantage we can provide is knowledge; understanding your circumstances and which lender’s criteria and products might best suit your scenario. This can resonate particularly with clients who have a far from straight forward set of circumstances.
Complex situations like becoming recently self-employed, should not be a barrier to attaining a buy to let mortgage loan. It just takes that extra bit of research to identify the lenders that will consider applicants in this situation – and to understand what the lender will need to see to demonstrate income and other details.
Take the example of someone who has been employed for ten years and all of a sudden, they become a director of the same company and come to own 25% of the shares.
Technically a lender will now classify them as self-employed.
Without having a long history of accounts behind them, this could preclude them from obtaining a mortgage with many lenders. We currently work with 18 lenders who would not need to see accounts; but in most cases, will need to see some form of proof of income.
The intricacies of what is required from each lender, would take the uninitiated significant time to identify, whereas we can narrow the search down quickly, explain the requirements of relevant lenders and discuss available products, to establish which one best suits your need.
Changing employment status should not be a barrier to buy to let borrowing and an experienced broker with a breadth of industry contacts and knowledge, really can make the difference.