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Problems Getting A Mortgage When You Are A Business Owner

by Jim ONeil on July 8, 2011

in Mortgages

Business makes the world go ‘round but it seems business owners are not loved by all. In the UK, some business owners are finding themselves unwelcomed by mortgage lenders.

Lenders seem to prefer salaried workers to freelancers, business owners, and other categories of the employed, treating the latter groups as people of a lower class.

Driving this credit crunch is the financial institution need to shrink the balance sheet as well as a crackdown by the Financial Services Authority (FSA) on self-certified mortgages. The result is a stricter application of lending regulations to people who are unable to promise a fixed monthly income.

This presents quite a problem for the would-be homebuyer.

Business owners are finding themselves unable to get even small increases in their mortgage because they do not have a static post-tax net profit. Though at first thought, this might make sense, lenders are not looking into the reason for the net profit decline.

The entrepreneur may have used funds to make a new business investment, a worthy move, but this is causing him or her to be labeled a bad risk.

It is unfortunate that missing just one risk metric can prevent an individual from getting cheap loans, or any loans for that matter. Not all banks are taking such a narrow view when quantifying risk.

The Swedish institution Handelsbanken assesses the entire financial position of the borrower before making a lending decision.

Many people in the UK fall into the category of non-traditional wage earner. If all of them are cut out of the housing market, there will be huge effects on the market itself. It could also dissuade people from embarking on their own, preventing all those excellent entrepreneurial dreams from becoming reality.

Before innovative ideas even make it out of concept phase, they will die, and with them will go the potential for expanding the economy.


Hello. My wife and I bought our house about 6 months ago. It was a foreclosure and we were able to get a great deal on it. We also took advantage of the 8K tax credit so that definitely helped. We did an extensive remodeling job and now I want to refinance to cut the term to a 20 or 15 year loan. Does anyone know any good sites for mortgage information? Thanks!Mike


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