Getting a mortgage as a taxi driver
Self-employed taxi drivers can often find it challenging to get a mortgage, just like many other self-employed individuals. Regardless of how much you earn, many lenders prefer the added security offered by people in contracted employment. This is because they can easily prove their income with payslips.
When it comes to taxi drivers, whose income may be variable and subject to work-related expenses, many mainstream lenders simply do not have the experience or procedures to assess income and evaluate the affordability of a mortgage.
Fortunately, there are more understanding lenders out there, usually beyond the usual high-street names. These lenders’ underwriting procedures have the flexibility to accommodate self-employed mortgage applicants.
To access these lenders it’s likely that you’ll need to use a mortgage broker. This is due to their expertise and the wide selection of lenders they have connections to. On top of this, some specialist lenders are not directly available to the public.
How to prove your income as a taxi driver
As a self-employed taxi driver, you won’t have the luxury of just providing payslips to a lender to prove your income. Instead, they will normally ask to see your business accounts.
Many lenders need to see three years’ worth of accounts to evaluate your income sustainability. However, there are some lenders who are willing to base their lending decisions on two years’ or as little as one year’s accounts. Normally, lenders require accounts to have been prepared or certified by a chartered accountant.
Many lenders will also ask for your SA302 year-end tax calculation, either as well as or instead of full business accounts. If you’re registered as self-employed with HMRC, the SA302 shows your total declared income from all sources, and the amount of income tax and National Insurance contributions due.
If you’re a company director, a lender will require you to show evidence of dividend payments and retained profits.
Finally, a lender will want to see bank statements to look at your expenses and income, which will help them determine your affordability. Lenders typically will want to see at least 3 months’ worth of bank statements, although as you are self-employed this can be more.
How much can I borrow as a taxi driver?
When lenders are assessing your application there are many factors that will determine how much you can borrow. Essentially, a lender will want to understand how much of a risk you are to lend to. The less risky you are perceived as, usually means you can borrow more.
Some factors that will present you as less risky and in turn could lead to your borrowing more include:
- Having a good credit history – this shows you have the ability to manage and repay borrowed finances.
- Providing a larger than average deposit – the more money you can put down, the more likely you’ll be able to borrow.
- Having consistent proof of income – as a self-employed taxi driver, consistent and steady levels of income shows a lender that you have the ability to consistently earn money to pay back your loan.
On average you will be able to borrow between 3 to 5 times your annual net profit; however, as discussed, this will vary between applications. To get an accurate idea of what you could borrow, why not reach out today? Our expert mortgage advisors are on hand to discuss your situation over a free no-obligation consultation.
How much deposit will I need?
As with any mortgage application, this will vary from person to person. However, due to the more complex nature of your income, a good deposit to aim for is 10% of the property’s value. If you’re seen as a risky borrower due to a bad credit history, for example, you may need to put down even more.
The main benefit of putting down a larger than average deposit is that it opens you up to many more products and lenders, which in turn can improve your chances of obtaining a competitive interest rate.
Using a mortgage broker as a taxi driver
Not all mortgage lenders are equal when it comes to understanding the implications of self-employed taxi drivers’ income, expenses and net profit figures. This can make it difficult to navigate the market and know who to approach.
Fortunately, we have access to lenders from across the mortgage market, including many who specialise in lending to the self-employed. These specialist lenders can’t always be directly accessed by the general public, therefore a broker is the only way to reach them.
If you want to discuss your possible options, get in touch today! Our expert team of advisors are on hand to discuss your needs over a free no-obligation consultation.
