BBC’s Apprentice 2014 winner, Mark Wright, and our Commercial Director of Mortgages at Aldermore Bank, Charles McDowell, discuss the key challenges that business owners are facing when it comes to mortgages.
The self-employed may feel like they get a bit of a raw deal when it comes to possibly making their biggest investment of their lives; buying their first home.
Many high-street banks prefer borrowers who can provide a solid and predictable story about their finances: regular job, regular income, and nothing too out of the ordinary. This criteria isn’t always something someone who has started a business is in a position to provide.
With 4.7m self-employed people in the UK, the struggle to get a mortgage with high-street banks is a widespread issue. The good news is specialist lenders are set-up in a way that they can offer mortgages to the self-employed whilst the rest play catch up. Aldermore take each application on face value and regularly approve mortgage applications with as little as one year of accounts.
We caught up with our Commercial Director of Mortgages at Aldermore Bank, Charles McDowell and Mark Wright to ask them their thoughts on some key questions covering the topic of self-employed mortgages.
Listen to the full interview here.
We recently ran a Twitter poll asking the self-employed what their biggest barrier to getting a mortgage was. The results highlighted proving income as the number one challenge. As someone who is self-employed Mark, what is your experience of this?
My experience has been terrible until recently. When I applied three years ago my business had been trading for only six months. At the time they required two years of audited accounts. Like most people, I went to the bank who I hold a current account with and they said no. Then I went to the high-street commercial banks, they also said no. I simply couldn’t get a mortgage. I had savings; I even had a letter from Lord Sugar! But it was the same response. I had no choice but to wait until I had two years of accounts before things started to move forward.
Does uncertainty in the economy have any impact on the self-employed securing a mortgage with Aldermore or will it be business as usual?
Charles said: “It’s business as usual at Aldermore. At this time of increased economic and political uncertainty, it’s more important than ever to create an environment that nurtures and cultivates entrepreneurs. Entrepreneurs truly change society. They change how we live and how we work. Innovations can change the standards of living, not only for themselves and their employees through wealth and jobs, but also for their customers. All of which improve the conditions needed for a more prosperous society. At Aldermore, we believe that those who have made the bold decision to become self-employed, shouldn’t be punished for not fitting in with the traditional norm. We make things easier for the self-employed by having a human approach to lending and consider each application on an individual basis. We want to support entrepreneurs and those who need specialist lenders.
How can the Government show more support to entrepreneurs – both encouraging them to start-up and maintaining their business?
Mark said: “In several ways. Giving entrepreneurs a break in their first few years of trading with financing, start-up loans and helping with bank fees. All of these things can encourage businesses and help them keep going”.
Charles said: “Policy makers have three key questions to ask themselves when it comes to support entrepreneurs. How do we encourage people to take the plunge? How do we shelter the business in the early days? And how to maximise their growth potential? Most importantly, the Government needs to engage with SMEs. It’s very unlikely that policies can be implemented with a ‘top down approach’. The Government must engage in debate and listen to what is needed”.
In your experience Charles, what has helped self-employed people overcome their fear of starting their own business/securing a mortgage?
It takes a lot of courage to make a major life decision to become self-employed. Ultimately, people will make this decision when the time is right, and they can make a success of their business. And I believe that this ‘courage to overcome this fear’ as many put it, is down to researching the situation and knowing what to expect. The more you read about something, the more you understand, and the more you realise you could do it too. This is very similar to a self-employed person getting a mortgage. You may be turned down by one of the big banks on the high-street, but there are plenty of lenders like Aldermore who can help you.
What one piece of advice would you give to someone looking to set-up their own business Mark?
Go for it! So many people have a great idea and it never gets started and dies in their head because they’re scared of taking the plunge. Go into a sector you know, understand and are passionate about. Think: do I know about this sector? Is there demand for the products or service? And what sort of margins can be made? If you have the right answers to these questions; get started now!
If you’ve been recently turned down for a mortgage application, or you’re considering applying, get in touch with us to find out how we can help. Visit aldermore.co.uk/mortgages .
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