Self-employed mortgage: the two-year wall.
Getting a self-employed mortgage usually requires about two years of accounts or tax returns, in almost every country. So a new business can be profitable and still be refused a normal mortgage in its first year.
The same wall in every country.
In the United States, standard rules ask for two years of tax returns and use net income. In the United Kingdom, lenders want two to three years of SA302s and accounts. German banks want two to three full years, and then cut your average profit by 20 to 30%. In Spain, two years as an autónomo is the floor. In Mexico, it is usually two years of returns, although some lenders accept less.
Five countries that agree on almost nothing arrived at the same number. Therefore resigning buys you roughly two years of being invisible to lenders.
A self-employed mortgage refused at £80,000.
Eve Scragg runs a marketing agency in Bristol that turns over eighty thousand pounds. Every high street bank refused her a mortgage. In the end, a specialist lender said yes, at a price. Her case does not prove every detail, but it shows the wall is real.
Get the order right.
Nobody tells you this, and it is not a conspiracy. Friends who left were not buying a house that year. However, the fix is simple once you know it. Get the loan approved while you still look like an employee on paper, and then go. People do this deliberately, and it is not cheating.
Put your borrowing date on paper.
Write the next date a lender must say yes to you: mortgage, remortgage, car, lease or rented flat.
If that date falls within two years of your planned resignation, move the loan in front of the resignation.
From the book.
The thing you're actually buying when you resign isn't risk. It's roughly two years of being invisible to lenders.
I Want to Start a Business but I Can't Quit My Job, chapter 3: The salary is not a number
Questions about self-employed mortgage.
How many years do you need for a self-employed mortgage?
Usually two, and sometimes three. That is the standard in the US, the UK, Germany and Spain, and common in Mexico.
Can I get a self-employed mortgage in my first year?
Sometimes, through specialist lenders, but usually at a higher cost and only if everything else about you is strong.
Should I buy a house before I quit?
If you plan to buy within two years, the book's advice is yes: get the loan while you still look like an employee, then resign.
Read the whole chapter.
This lesson covers one section of chapter 3, “The salary is not a number”. The book goes further, with the full evidence, the stories and every exercise.
