The prospect of being your own boss is something many of us aspire to achieve. Following your passion, gaining freedom, the possibility of early retirement and financial reward... what is not to like? Well, for one, the negative perception that many lenders have on those classed as self-employed can be a drawback when securing funds.
During the recent economic turmoil caused by Brexit and the COVID-19 pandemic, many exited the labour force to become self-employed, with the number of self-employed peaking at over 5 million people in 2020. Since then, the number of self-employed has fallen by 16%, to 4.2 million, according to official ONS data.
Pre-COVID-19, workers were flowing from 'employee' to 'self-employment', however, this trend reversed during the pandemic, with a greater number (165,000) moving from being self-employed to employee status in July to September 2020. Furthermore, from April to December 2021 the net flows from self-employment to economic inactive were a major contributor to the overall decrease in self-employment. However, the number of self-employed is beginning to recover and is expected to surpass the previous peak of 5 million.
Pension vs property - How the self-employed plan for their future
The need to have a longer-term plan for your retirement is something the self-employed may think about a little more than their employed counterparts. The lack of a work-based pension can lead to self-employed looking at property not only as additional income but also as a 'safe' strategy for their retirement. According to the ONS data, during "April 2018 and March 202, just 20% of self-employed paid a pension, compared to 80% of employees". Without a pension, these people need to be considering alternatives for their retirement.
Buy-to-let is often seen as a long-term investment, with the idea being that property will invariably increase in value overtime, provide a tangible asset and an income. With volatile economic conditions and high inflation rates, self-employed workers may see property as the best way to save for their retirement with ONS data showing 38 percent of self-employed workers see property as the safest way to build up savings for when they retire.
Opportunities and prospects for self-employed
It is often viewed that the self-employed are around twice as likely to have a mortgage rejected compared to their employed counterparts. Therefore, individuals must circumnavigate this challenge by providing larger deposits or seeking finance from less traditional lenders away from the high-street. Specialist lenders like West One can provide a flexible, personal approach to offer solutions for the increasing number of self-employed, which may be unavailable through high-street lenders.
There are also ways to improve your chances before any funding applications are made by making some simple changes and acting of time, these include:
Speaking to a broker - Allow brokers to demonstrate their value. At the earliest opportunity use a broker's experience and knowledge of the market to assess and understand your current position and advise on the next step so you can see the finance options available.
Increase LTV - A larger deposit can increase the prospect of securing borrowing.
Personal assets - Assets can be used to secure loans. These assets can also belong to a family member. For example, parents may be able to offer equity in their property as security.
Manage your outgoings - Large expenditures can have an adverse effect on your ability to borrow. Investments in a business can impact profitability, assess timings of your investments and if expenditure can be spread over time.
Check credit history - Ensure all information is up to date, and correct errors in credit history, regardless of size, can affect the ability to borrow.]
Electoral roll - Being registered to vote can be beneficial to your credit report and improve your chances of approval.
West One are primed to support all types of applications with experience, know-how and skill. With the aim to deliver a seamless lending solution. Explore how the West One approach can help applicants secure funding.
Personal approach - West One treats every customer and case individually. Speaking with West One representative to understand challenges and needs.
Credit risk - An innovative approach to risks tackling each scenario on its own merits.
Know how - Over 15 years of experience in specialist finance markets. The team have encountered and conquered many challenges in the marketplace, and we aim to provide a solution individually and collaboratively.
Bespoke solutions - West One can provide bespoke solutions taking into account a number of factors which may affect an application.
Speed - Not only the UKs fastest growing specialist lender. West One can produce offers promptly so that opportunities are not missed.
As the labour market continues to evolve the opportunities to provide specialist mortgages will undoubtedly become more diverse in order to meet the challenges caused by this change. Employment rates and status will fluctuate, but one thing we can be sure of is there will always be people whose status is self-employed driven by their love for what they do, freedom and financial reward.
Specialist lenders will help them borrowing and demonstrate that being self-employed should not be an obstacle in securing funds or the next investment or your dream home.
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