Property: Don't give up the day job - if you want a mortgage

The self-employed face discrimination when buying property, reports Ginetta Vedrickas.

You want a quick sale. Two buyers make equivalent offers. Both appear serious and neither are in a chain. How do you choose? I found myself in this position some years ago and, having a slight preference for one buyer, sought my agent's advice. "Don't touch him with a bargepole," he barked. "He's self-employed."

I didn't and the sale was swift. Are the self-employed dispossessed? And how can they maximise their purchasing power?

Stephen Smith, manager of the Dulwich branch of estate agency Bushell's, admits that alarm bells ring when applicants are self-employed: "We have more problems with them getting mortgages than anyone else. As agents it's our duty to make sure they can proceed so we will push them harder to see our mortgage specialist."

Stephen Smith loses less sleep over the long-term self-employed as they generally have several years' proof of earnings but the newly entrepreneurial can irritate: "They come in, they've only been self-employed for four months and they wonder why building societies won't lend them the money. They make you laugh."

Liz Godwin knows the pressures facing freelancers more than most. A compulsive mover, six times in two years, she has resorted to a "non-status" mortgage for each purchase. This type of loan caters for borrowers unable to supply adequate proof of income or with poor credit ratings. Lenders protect themselves by asking for a higher deposit and charging higher interest rates.

Liz is a successful, established artist and currently borrows from the Bank of Scotland. Surely she qualifies for a mortgage with favourable rates? "I've tried but it was so much hassle I gave up. It seems much easier just to get my accountant to send a letter basically saying I'm good for the loan."

In addition to unfavourable interest rates, freelancers can face accountancy bills of several hundred pounds.

Most lenders deny discrimination but the evidence suggest the contrary. Salaried borrowers must prove their income for the last six months but self-employed applicants are frequently asked for two to three years' accounts plus a projection of their next year's earnings.

This can seriously hinder the amount they can borrow, particularly if their business is new. But could the self-employed do more to help themselves? One agent claimed that they have only themselves to blame: "They spend years trying to dodge paying tax so when they try to get a mortgage it hits them hard. On paper they're virtually on income support yet it's obvious they are rolling in it."

Richard Turnbull, mortgage broker for Patrick Knight, is more sympathetic. He has just received a call from Northern Rock refusing a mortgage for David, a freelance sub-editor and Karen, a supply teacher: "It seems extremely unfair," says Richard. "They are highly experienced, professional people who choose to freelance. They have excellent credit ratings and a large deposit."

David and Karen have rented for almost three years and recently decided to buy a flat in London. Through their broker they applied for a mortgage from Northern Rock with a rate fixed at 5.99 per cent for 5 years. The "unbeatable" deal is for borrowers with a minimum deposit of 25 per cent, a requirement that David and Karen fulfil, yet they were refused.

What do they think of Northern Rock's attitude? "I think it's a bit 1950s," says David. "They are entitled to their opinion but had they asked our landlord they would find that we have never once been late with the rent and we're not likely to default on our mortgage payments."

Northern Rock says it treats self-employed applicants equitably and considers all cases individually. But a spokesperson cautions: "Our criteria is not just to safeguard the lender but the borrower, too. If we refuse a mortgage application we're doing the customer a favour. Perhaps they are overstretching themselves and should look again."

Some lenders say they are making greater efforts in what many admit is a market in which they are less than pro-active.

Richard Turnbull believes that slowly relaxing attitudes are not keeping pace with his changing clientele: "In the current market more people than ever are taking a positive decision to give up their salaried jobs and strike out on their own, so we need more flexibility from borrowers."