Home Buying Your First Home: A Step-by-Step Guide A Mortgage Loan as a Self-Employed Person? 4 Tips!

A Mortgage Loan as a Self-Employed Person? 4 Tips!

Entrepreneurs take risks, banks want security. That’s the balancing act you’re in when you want to take out a mortgage as a self-employed person. The rules seem designed based on employees: fixed income, savings, stability. But for a self-employed person, things work differently: starting up, investing, giving it your all.

It’s not always simple to get a loan in such circumstances. Need a few tips? Here you go!

Building a business usually means heavy investment. You work hard, but even if things are going well, the costs are so high that little profit remains. You might not be living on bread and jam, but on paper, you’ve earned peanuts. Fiscally, this works out well. You are taxed on your profit, and you make none. For a mortgage, it’s the opposite: without formal income, you’re in a bad position to borrow a significant amount of money.

This isn’t necessarily bad will. Lenders also have to follow certain rules and they must not put anyone in a state of over-indebtedness. So even if your banker believes in your brilliant idea and financial plan, they might still not be able to explain it to the director.

Tip One: Rent for Another Year or Two

Let’s start with the least exciting advice: wait a bit. For a self-employed person, one month is not like the next—in fact, one year is not like the next. What lenders want from a self-employed person isn’t a recent pay slip, but the heavier artillery: tax assessments, balance sheets, and profit and loss accounts.

It depends on the bank how much they require, but it usually means you need to be active for two or three years to demonstrate the stability of your income. Starters can’t do this. However, it’s not necessarily a disaster to rent for a while longer. If you have little experience, you could still stumble. You don’t want a hefty mortgage for a villa to become a noose around your neck. ‘Think big, start small,’ as they say?

The sector you’re active in can help. A doctor or lawyer will find it easier to get a mortgage. Is that fair? No. Is it a fact? Unfortunately, yes. From the bank’s point of view, it’s a matter of security, and their vision of it is not very creative. It also helps if you have a track record in a certain field. A roofer who gained years of experience as an employee before starting part-time and then taking the plunge into self-employment is in a better position.

Tip Two: Hello Accountant? Prefer a Home Loan Over a New Car

The scenario mentioned earlier, 100% investment and 0% profit, is especially true for starters. But even self-employed people who have been doing well for a while may not always show much profit on paper. This often involves creative accountants who encourage you to maximize expenses. They come up with structures with one goal: maximum tax efficiency. For a mortgage, that’s a sticking point.

Working with losses or negative equity (on paper) is bad news at the bank when you’re borrowing for a house. So think twice if your accountant insists on a new company car while the old one is still running fine. It may be good for the business, but it’s just as bad for your loan as it is for the environment. Don’t let your personal future be hindered by an overly business-focused perspective.

Tip Three: Borrow Money from Friends

Self-employed people, whether full-time or part-time, often combine their family home with an office, workshop, or warehouse. Golden tip: perhaps finance the professional part through a win-win loan. This is a loan from family or friends, with conditions eased due to the coronavirus crisis:

  • The term can now range between 5 and 10 years.
  • The maximum amount per lender has been increased to 75,000 euros.
  • You can borrow up to 300,000 euros in total.

Why win-win? You win because you get the money easily without having to prove so much on paper. They win twice: the interest you pay them (max. 1.75%) and a discount on their personal income tax. Interesting!

Tip Four: Rely on Expertise

Not all banks are the same when it comes to the self-employed. Sometimes it’s historically grown: one bank preferred to invest in entrepreneurs, another supported the diligent saver. At hypotheek.winkel, we know the differences, and it’s knowledge we gladly share.

And we haven’t even talked about what you can save on your loan itself yet!

Come visit hypotheek.winkel. Together, we will look for the best loan tailored to your needs and turn all pitfalls into trampolines to a better life.