If you work in London as a self-employed contractor and received a SEISS grant during the COVID pandemic, you may now need to understand how to get a mortgage after a SEISS grant.
Unfortunately, mortgage lenders have not adopted a consistent approach in their lending criteria with regard to recipients of SEISS grants.
However, it is still possible to get a mortgage after a SEISS grant, particularly if you apply through a mortgage broker who is an expert in the field.
What is an SEISS grant?
Many self-employed people were forced to replace their income with grants from the Self-Employed Income Support Scheme (SEISS) during 2020 and 2021, due to loss of income during the COVID pandemic restrictions.
SEISS was set up by the government as a temporary scheme to help self-employed people maintain their earnings during the COVID pandemic. It can be thought of as the self-employed version of furlough.
There were five grants available under SEISS, obtainable at different times throughout the pandemic. The first opened for applications in May 2020, and the deadline for applications for the fifth and final grant was in September 2021.
Why do SEISS grants affect mortgage applications?
If you’re self-employed and have received a SEISS grant, it is likely to affect your mortgage application in some way.
Some lenders have been exceptionally strict in their approach and have simply rejected all applications from SEISS recipients.
Other lenders have adopted a much more flexible approach, with some even accepting the amount from the scheme as income for the purposes of their affordability tests, providing it can be shown that historic profits match or exceed the amount.
The banks adopting the strictest approaches – where those in receipt of SEISS grants will fail the lender’s affordability tests – argue that it is not responsible to allow those who have been financially impacted by the pandemic to take on higher borrowing.
However many believe that this contradicts the social contract laid out in the initial offering of the SEISS grants, whereby those applying for the grants believed that they were being pitched as a ‘safe haven’ and would not in themselves have additional financial implications.
There is a real need for more clarity and fairness in the approach of many lenders – which is why getting help from an expert broker with an in-depth knowledge on the best lenders for SEISS recipients is often the best way to proceed.
Getting a mortgage after a SEISS grant
Understanding how to get a mortgage after a SEISS grant can be fairly easy, and it is certainly possible to get a good deal.
In addition to utilising the services of a good mortgage broker who has an in-depth knowledge of mortgages for the self-employed, there are a number of steps you can take to increase your chances of being approved.
First of all, if you can then it is best to wait until you’ve resumed trading for at least three months before applying for your mortgage.
You need to have evidence that you have returned to your usual income expectations, and it is likely that this evidence will be required in the form of at least three month’s bank statements.
As far as paperwork is concerned, you will also need to provide a copy of your approved grant/s with the amount and duration shown.
And you’re likely to be asked for an explanation of exactly why you needed the grant, and why you are now confident in your income going forward.
Another very important step to increase the likelihood of a successful application is to save for the biggest deposit possible. A 25% deposit is likely to open significantly more doors than a smaller amount.
You should also take all the usual steps involved in improving your credit score, such as registering on the electoral roll and making all of your payments and bills on time.
It will also be helpful to have all of your documentation in order, which you will need to have to hand during the application process. This includes:
- Two or more years of accounts
- SA302 forms or a tax year overview for the past two to three years
- Proof of dividend payments or retained profits if you’re a company director
- Evidence of upcoming contracts if you’re a contractor
- Passport and/or driving license
- Council tax bill
- Three – six months of bank statements (to determine how much you spend on bills and other expenses)
- Utility bills dated within the past three months
SEISS grant as income for your mortgage application
It is worth bearing in mind that there are a handful of mortgage providers who will allow you to declare the amount of your SEISS grant/s as income.
This makes it significantly easier to pass their affordability assessments, since most lenders disregard it from their calculations.
There are also some lenders who will accept your SEISS grant as part of your deposit.
For more information or to discuss our services, contact London Building Surveyors today.