Generally, lenders do not have a set of different rates or products for the self-employed, they treat them just like everyone else.
The challenge is for applicants to prove their regular income, especially as their income can vary, while employees’ income can be verified by their employers.
Mr Morrey says there are more mainstream lenders with good underwriting criteria in this space than specialist lenders.
For contractors he recommends Halifax, TSB and Scottish Widows, for example as very good in the self-employed sector of the mortgage market.
Pushing boundaries
However, he wants to see more innovation from lenders and quicker decisions from HMRC and the government about what is and isn’t allowed.
He says that the self-employed are constantly pushing the boundaries and it takes HMRC and lenders too long to catch up.
Lenders need to be better at understanding how umbrella companies work, for example.
Directors’ loans are another area of controversy.
Some accountants think it is legal for the self-employed individual to make a loan to the company, so that it is seen as a return on capital rather than earnings when it is repaid. HMRC is said to be looking at the practice.
However, Mr Morrey argues that HMRC should be acting more quickly to decide whether new schemes are tax avoidance or tax evasion.
It would better protect the lender, intermediary and individual.
Accountants and applicants need to think about the legality of the schemes they are using because if lenders don’t like them, they won’t consider them.
Would-be applicants should talk to a broker about the schemes their accountant has suggested and ask how it will affect the mortgage they are likely to want in 12 months’ time.
The last thing lenders want is to be lending to someone based on fraudulent practices.
Laverne Hadaway is a freelance journalist
