Self-employed and trying to buy: what they don’t tell you

It feels slightly ironic writing this right now. As I am waiting to hear if an offer I’ve made on a flat has been accepted. I’ve checked my emails six times while writing this post in case one has come in from the estate agent. This is the first time I have got to this stage in three years of trying to buy.

I have been simultaneously self-employed and renting in London for 13 years now. During the last three years of bank meetings, financial adviser consultations, filling out forms for housing associations (shared ownership) and estate agents (‘normal’ buying), I have learnt a few things – some the hard way – and wanted to share them, in the hope they can help others in a similar position to me who are looking to get on the property ladder.

• Some estate agents and housing associations will only count income you have invoiced for, and discount any PAYE work during that year, even though some companies insist on paying through PAYE. For the sound engineers who are paid both ways, the actors who temp on PAYE zero-hours contracts between jobs, and many other people who, though registered self-employed, are sometimes paid through a company’s pay roll, this can spell trouble. In one year, I earned £5k through PAYE work. Though HMRC were very happy to tax me on these earnings, the housing associations would not consider this as income. Therefore, the amount I could borrow for a mortgage dropped by £20,000! I lost the sale.
• If you are looking to get a mortgage in principle, go to your bank first. Though they may not offer the best rate, they are less judgemental about you being self-employed than banks who don’t know you and your finances intimately. They will be more fair in that they will look directly at your outgoings and incoming finances. As a counter point to point one, they do not care how you are paid – to them, income is income!
• Once you have your mortgage in principle, shop around at other banks. By showing them the competition, you can ask them to beat it and they may offer more favourable rates. This also demonstrates to them the trust another bank has in you, despite you working for yourself, and how risky they are prepared to be in terms of lending.
• Although most lenders will base their decision on your last two years’ tax returns, estate agents and housing associations will want to see three years worth of tax returns in order to check that your income has increased between the first of the three years and the second of the three years.
• Keep going and don’t give up! Rental prices are increasing with no signs of a crash, and renting offers minimal stability (although some landlords are bringing in three-year tenancies which I applaud). I have looked at all kinds of ways to buy. Buying alone, as a self-employed creative, without a humongous deposit is tough. I have looked at buying out of London (verdict – train fares are rising and so are house prices, and most of my work is in London so would be more expensive!). I have looked at shared ownership (verdict – nearly as expensive as renting privately with a whole lot more hoops to jump through, unless you have a partner or children, or are a key worker). I have looked at auction (good if you have a lot of cash ready to go as many are cash buyers only, bad if you don’t). I’m now looking at a one bed (rather than a two bed) that needs a lot of DIY and TLC, as what my Dad and I will spend on materials and the time our labour will take will always be less than buying a spruced up property.