Buying a house when you’re self employed is tough, especially when you’re doing it by yourself, and you’re a travel blogger. But I did it.
I bought a house this year, as you’ve probably read me type a few times on here – still exciting.
I don’t earn millions, or tens of thousands, but I earn just above the UK average, or thereabouts. I managed to do it despite the fact I didn’t have three years of financial records, I was doing it alone, and I didn’t have some big inheritance to play with. When I was researching, back in July, I couldn’t really find much information on buying a house when you’re self employed so vowed to bridge that gap when I was ready… here goes.
19 Tips for Buying a House
When You’re Self Employed
1. Get a Help to Buy ISA
If you’re planning on buying a house in the next three years, whether you’re self employed or not, you need to open a Help to Buy ISA. The sooner the better. It’s the best way of saving possible. I opened mine in 2015, and ended up with £967 from the government deposited into my bank account a few days after completion. £967 for free. Kinda. It was brilliant.
Here’s the info copied and pasted from the UK government’s website so nothing gets lost in translation.
“If you are saving to buy your first home, save money into a Help to Buy: ISA and the Government will boost your savings by 25%. So, for every £200 you save, receive a government bonus of £50. The maximum government bonus you can receive is £3,000.”
So if I’d’ve started a few years ago, when I started saving into a normal ISA, I could have an extra £2k by now. Just another lesson learnt the hard way by me so you can do it right.
I opened my Help to Buy with Virgin Money, just because that’s who my normal ISA was with. Shop around for the best one for you.
Make sure to cancel your Help to Buy in time and inform your solicitor that you have one so they can either take the money off the price, or as in my case, refund on completion.
2. And a Savings to Buy ISA
If you have more than £200 to save a month I’d recommend opening a Savings to Buy ISA. The interest rates you can earn are higher, and it’s a good way to squirrel away even more so you can make your money work for you. Every pound counts and if you can just sit back and know that the interest is piling up it’s something less to worry about.
3. Find a good mortgage broker
I used Patrick. Good old Patrick – he knows things. He helped my self-employed friend get a mortgage, and just understands things are a little different for us. I’m happy to give you his details if you email me.
He found me a mortgage which only assessed the last year’s earnings, rather than an average of the last three, which is the usual approach. I had earned quite a bit more in the last year of being self employed, than the two before, so it meant I could borrow more.
I went to two other estate agents to talk to them about mortgages and their knowledge and assurance was vastly inferior to Patrick’s. I already knew I was going to go with him but it was when the second guy said, ‘don’t you want someone who’ll be there for your mortgage for the long run’ that I thought ‘yes, yes I do, which is why I don’t trust you’.
Yay for Patrick.
And, thanks to last week’s news in the UK, also yay that I decided to go for a Fixed mortgage over a Variable too. Another delightful choice for you to make (SO many decisions in home ownership by the way).
The other estate agent did give me some good advice though, and another take on what I should do. I’d definitely recommend shopping around, taking on different advice, but then going with Patrick.
4. Get your finances in order
You will need to prove, to everyone, that you have enough money in your account to do this. You’ll need to provide your bank accounts for the last three months.
You’ll need to fill in the mortgage brokers questionnaire, get all your Self Assessments in order and request all your SO32s.
I was nervous about the bank accounts. I’d spent a lot in the preceding three months, mainly because I’d furnished my room in my shared flat from two suitcases of stuff to a proper place where I could live. I’d also bought way too many clothes, a camera, a desk – all sorts. I’d also been out, a lot. But anyway, they weren’t looking for that. They were looking for sketchy transactions like gambling, money laundering – that kind of thing. My £10 pad thai night (s) were of no concern to them.
I was so nervous about being approved by the mortgage broker and the solicitor I genuinely felt sick for about a week. Friends even commented that I’d lost weight, seriously.
Didn’t really believe I owned the house until I actually moved in.
5. Always offer under the asking price
I got my house for £12,500 under the current asking price, and £22,500 under the original selling price. It’d had a previous buyer who’d backed out at the last minute and the seller just wanted rid. It was an old lady’s house who was no longer part of our world, so for her children it was just a reminder and a hindrance.
My lower offer was accepted based on the fact that I was chain free, and the promise I’d be as quick as possible to get everything in order ready to buy.
6. Know your expenses
As I said, I’d been looking at buying a house for a while so a year ago I got in touch with the mortgage broker (Patrick) and asked him how I could be mortgage ready in a year. One of the things a lot of self employed people do is to not claim expenses. I know, it hurts. It hurt real bad. But, it meant that my filed income was more when I reported it in NET. This is of course totally legal, the tax man is better off after all. This means you can borrow more, as your earnings have increased.
Be prepared for your next tax bill though – it’s going to be an absolute stonker.
7. If you can get a 15% deposit, do
I’d saved 13% to put towards my house deposit, and very kindly had a loan from some magical people to top up to 15%. Over the course of my life this will save me thousands and thousands of delicious pounds. When you have 15% to put down, the rates are way better, the amount of mortgage providers you can use goes up and your mortgage will be a lot cheaper over your life time.
If you can wait to save more, or borrow some to top it up – do it.
8. Choose a local solicitor
I went with the one my estate agent recommended, kind of to keep them happy and because they would know the area, and I could pop in if I needed. This turned out to be an excellent decision.
The solicitor rang on the Friday wanting me to come in and sign on the Monday, but I was going to Papua New Guinea for two weeks on the Sunday (as you do), so she gave me 30 minutes, till the end of her lunch break to get up there and sign on the dotted line before she was busy again. Made it.
If she hadn’t have been so local I coulda lost it, or, to be less dramatic, at least would’ve had to wait another anxious two weeks.
9. You’ll need around £2500 + stamp duty
Don’t forget you have fees to pay on top of the house price – my solicitor’s fees came to around £2500, and that you’ll need to pay stamp duty too.
One of my friends just bought in London and all of this came to £17,000 for her YIKES and YANKEE DOODLE DOO. Yeah, mine wasn’t anything near that, but was still a cost to consider.
10. And money for renovations
Oh, this is the one that got me. Buy a dilapidated house I thought, save some money upfront I thought, it’ll be fun, I told myself. It was / is fun, but it’s also bloody expensive.
All my house needed redoing, from the wiring to the plastering, and it’s coming up costly. I’ve had to lower my expectations for what I’m going to do to the place (blummin Pinterest) and just check myself a little. Things are going to have to slow down for a few weeks, while I try and top up my dwindling bank account. I’ve written about the first three weeks of home ownership, if you’re interested – and so you know what to expect.
Week One: Trashed the Place
Week Two: 5 Lessons for New Home Owners
Week Three: Accepting My Limits
11. Check you can rent a room
My house has three bedrooms. I’d originally planned to rent out one room for company and money, but if you read point 10 you’ll understand why I’ve now decided to try and rent two instead.
You can rent out a room for up to £7500 per year, tax free under the government’s Rent a Room scheme. Just another tip to help you with those spiralling costs.
Before I signed up with my mortgage provider I checked that this would be ok as it was always in the plan, and it was. When the time comes I also need to check with my contents and building insurance too, and possibly change it. Gotta keep it all legit.
12. Book the internet
When we were deciding a moving in date they laughed when I told them I couldn’t accept the keys until I had Wi-Fi up and running. I was actually deadly serious. Apparently they didn’t want me to go in and install Wi-Fi before it was actually mine though, so I just kept my old flat for a week of overlap instead.
Turns out with Talk Talk you just get a router and set it up yourself anyways – did it in about ten minutes.
If you’re self employed and buying a home, having access to good Wi-Fi is essential. Sloping off to cafes when I should be in accepting deliveries and getting people to plaster my walls means I’ll miss out on getting things done. Do some research on the best internet provider in your new area and get it all booked in / posted in advance.
13. Plan your time
I’m in a bit of a hurry with my house, because I want to get it done and get those rooms rented out. But, I’m also limited by money, ability and time. As well as renovating the house I also need to live and work in it too.
Obviously if I worked in an office I’d have the sanctuary of going off to a cushty workplace but as a self employed person I’ve needed to be quite strict with myself. Technically I could work on the house all day, but then I wouldn’t make any money to pay for things.
I’d recommend you have some sort of plan to have time to work and time to do the house – of course this depends on how much work your house needs. Just plan your time to suit you, and give yourself a break too.
14. Buy essentials second hand
Charity shops, eBay and Facebook Marketplace will become your best friends when you’re looking to get furniture for your house. I picked up a lush sofa from a couple down the road from me who were selling everything to go and travel the world. People change and update their furniture all the time and just want rid of the old stuff – it’s a great way to get started.
Also, my mum has a brilliant eye when it comes to charity shops and she picked me up some great stuff. My personal charity shop shopper. Dad got some good stuff from boot sales too.
15. But know when to spend
The electrics in my house were super sketchy, so I got an electrician in to sort the lot. They were even sketchier than first thought though ($£). Same for the walls. The place was being held up by the wallpaper. In turn a huge part of my budget was spent on plastering the upstairs and the electrics, but this is the kind of thing I definitely can’t do on my own.
I also decided to get someone in to paint my ceilings as even the thought gives me back ache, but I’ll do the walls myself. Or at least, with friends.
16. Download OnTrees
I had this app called Money Dashboard, which I loved. You could link all your bank accounts and it kept me updated on spends and savings – great for knowing how much money you have when you have multiple current and savings accounts.
Then one day it kicked me out and I could never get back in again. So then I discovered OnTrees, which is the app from MoneySavingExpert.com (the best savings website IMHO). It does pretty much the same thing but has a better interface. This app has really helped me to stay on top of what money is going where and doing what, and making sure I have enough in the right accounts.
17. Look at protection insurance
This took me a long time to sort out. Don’t be like me.
In fact it was only last week, after hearing about a travel blogger friend (Jodi from Legal Nomads) who is currently in so much pain from a Spinal Tap gone wrong that she can’t even sit up for more than a few minutes, let alone work, that I decided I needed to get on this ASAP.
If something should happen to me and I can’t work any more, I’m pretty screwed. No sick pay, no understanding boss, no one to do the work for me, no savings. Yeah, worryingly risky.
There are a few insurances you can take out.
I went with the MPPI – Mortgage Payment Protection Insurance for around £15 a month. Well worth it.
18. Get a Will sorted
You’ve worked hard and got an estate now, you need to make sure it doesn’t get taken away from you if the worst should happen.
“If you die without a will, the law says who gets what.” – gov.uk
I rang the solicitor I bought my house with and they charge £250 for a single Will – overpriced according to moneysavingexpert.com. Co-op do a flat rate of £150 or you could look at Will Aid who, every November, do Wills for £95 which all goes to charity – if you can get an appointment .
You could also buy a pack from WHSmith or the Post Office, for around £15, which outlines how to do it and is all perfectly legal. From my research I think this is fine if your estate and wishes are straight forward, and there aren’t too many beneficiaries involved, but from everything I’ve read online it says they’re very open to misinterpretation so be careful. I decided against this because of having my own business.
I used the moneysavingexpert site to find a deal at £99 with a well-known funeral company that stored it for life for free. Be careful of deals that offer free wills but charge storage though – one was £25 a year. If I live to be 100 that could be £1675!
19. Read everything
Over the past few months I’ve gone down many a research rabbit hole online – from mortgages to contents insurance to prices of plasterers. Knowledge is power so talk to friends, family and people who’ve been there and done that. Read newspapers, magazines, talk to different estate agents and go online. Accept and listen to all offers of help and then decide for yourself.
Buying a house on your own when you’re self employed is totally nerve wracking and I don’t think I’ll properly relax until I’ve got the rooms rented and replenished a few savings, but it’s all good fun isn’t it? Right now I’m still only living downstairs while the plaster upstairs dries out and awaits its colour.
But as someone said to me – “gotta crack an egg before you can make an omelette”.