Self-Employed workers have been hit hard by the onset of Coronavirus. In addition to the likely loss of business income, many would have fallen through the net with regard to obtaining government funding to help see them through.
The upshot of this is that we’ve seen a record quarterly drop of 238,000 in the number of workers that are self-employed – an amount that now stands at 4.76m.
(Source: Office for National Statistics, Labour market overview, August 2020)
That said, it’s quite likely that many self-employed workers would have been fairly adept at swiftly restructuring their offering to ensure revenue continued to flow in. And, following lockdown, may be reassessing how and where they live, and looking to fund renovations, or seek a new property.
Stricter lending requirements
However, even prior to COVID-19, the self-employed – which still represents almost 15% of the total workforce – had sizeable hoops to jump through to secure a loan.
The issue with lenders is that unlike assessing a payslip, the income stream of the self-employed is not as clear cut.
This is compounded by the way some self-employed organise their payments to ensure they’re tax-efficient (such as more income via dividends than salary). This could work against them when wanting to demonstrate to a lender they have the ability to fund the loan they wish to take out.
The term ‘self-employed’ can also present a problem for lenders, as it pulls together a whole host of different individuals. This could mean that a myriad of workers with differing income streams and earning potential are lumped together, resulting in the computer possibly saying: ‘no’.
Impact of COVID-19
Beyond this, the economic impact of the pandemic means that even more information is now required, such as:
– wanting to know if the client has experienced a reduction in their self-employed income due to COVID-19.
– is in receipt of the government Self-Employment Income Support Scheme, or a Bounce Back Loan.
– were any of their staff furloughed (if applicable).
– more recent bank statements, as the latest accounts would probably apply to the period prior to COVID-19.
In short, mortgage providers are looking for proof the business is viable, and to understand how the pandemic has affected the work and income of the applicant.
How we can help
We are already dealing with other self-employed workers, and know our way through this particular mortgage maze, and would approach the lenders that we know are more sympathetic to your particular situation. Get in touch.
Self-Employment Income Support Scheme
You may have been one of the 2.7m Self-Employed workers that benefited from the First Grant.
(Source: GOV.UK, 17 August 2020)
Either way, you can claim for the Second and Final Grant up until 19 October 2020.
Eligible individuals can claim a taxable grant worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profit, and capped at £6,570 in total.
To check if you qualify, please go to:
www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
