If you’re self-employed, you’ll already be aware that applying for a mortgage might be a little more complicated than with a traditional employment status.
The good news is that both sole traders and limited company directors can get a mortgage, and for most lenders, your business structure isn’t the deciding factor. What matters more is how stable your income looks, how long you’ve been trading, and how you document what you earn.
Simmonds Mortgage Services is here to make things easier. In this blog, we break down how lenders assess each setup, what documents you’ll need, and how to give yourself the best chance of getting your mortgage approved.
Want to know where you stand? Contact Simmonds today to discuss your mortgage options.
How mortgage lenders assess sole traders
If you’re a sole trader, lenders assess your self-employed income based on your net profit (your income after all expenses are paid). Most lenders look at the last two tax years, although some will happily accept one year if you have a strong case and evidence to back it up.
They typically review:
- Your SA302/tax calculations
- Your Tax Year Overviews
- Your full tax return
- Your certified accounts (if you have them)
- 3 to 6 months of bank statements
Your taxable income is key because lenders use this figure to calculate affordability. The higher your declared income, the more you can usually borrow. If your income fluctuates, many lenders will take an average, although some will consider the most recent year if profits are increasing.
Keeping clean and organised records can make a real difference. Using accounting software or hiring a qualified accountant can make it easier, but at the end of the day, you need to stay on top of your tax bills and build a clear picture of your business finances.
How mortgage lenders assess limited company directors
If you run a limited company, lenders look at your income slightly differently.
Instead of assessing “salary only”, most lenders consider:
- Director’s salary
and
- Dividend payments
Some lenders also take into account retained profits or company profits, which can be especially helpful for tax-efficient directors who keep money within the business. They would typically then look at your Director’s Salary and the company profits before or after corporation tax. This often can yield higher loan sizes.
When reviewing your application, lenders want to see that your business generates reliable income and that your trading history shows stability. That doesn’t mean you need decades of accounts, but the more evidence you can show, the better your chances with most banks and lenders. Some lenders don’t need accounts and can purely look at your dividend and salary from your tax calculations.
If you’re also weighing up whether to buy property personally or through your company, you might find our guide on buying property personally vs through a limited company helpful.
What lenders ask limited company directors for
Specialist lenders are often more flexible in cases involving new companies, fluctuating profits, or where you draw a low salary for tax planning. At Simmonds Mortgage Services, we often work with self-employed clients, so we know which lenders take a more generous view of company director income and which ones don’t.
Here’s what you can expect lenders to ask for and why:
| What lenders ask for | Why they need it |
|---|---|
| 1 to 2 years of full company accounts | To confirm trading history, profits, and business stability. |
| Director’s salary and dividends | To calculate your self-employed income and assess affordability. |
| SA302/tax calculations | To verify your taxable income and cross-check figures with your accounts. |
| Tax year overviews | To confirm that your submitted tax returns match HMRC’s records. |
| Business bank statements | To assess cash flow, spending habits, and any potential upcoming costs in your business. |
| Personal bank statements | To assess your personal affordability and financial habits. |
| Management accounts (if recent accounts aren’t available) | To give lenders up-to-date information about your company’s performance. |
| Evidence of upcoming contracts | To show that you have a stable income coming in. |
| Confirmation from a qualified accountant | To verify certified accounts and business viability. |
Should I wait until I get a mortgage before changing from sole trader to a limited company?
Many self-employed people think they need to delay incorporating until after they get a mortgage. But the truth is, there’s no one-size-fits-all answer. Both setups can work perfectly well depending on your income, how stable your business is, and which lenders you approach.
But remember, changing your business structure can affect how lenders view your income because most lenders will treat a newly incorporated business as having a new trading history. In some cases, this means you’d need to wait until you have 12 months or more of accounts under your belt before applying for a mortgage.
However, other lenders (especially specialist lenders) may take a more flexible view, especially if your work and income remain the same.
Sole trader vs limited company for getting a mortgage
To help you get a better idea of the pros and cons of each setup, we’ve created a quick and simple comparison table. Check it out:
| Structure | Advantages | Considerations |
| Sole Trader | Straightforward income assessment | Relies solely on declared profits |
| Fewer documents required | Can limit borrowing potential | |
| Possibility to include retained profits for affordability | ||
| Limited Company | Potential tax savings | Requires more detailed accounts which a qualified accountant must prepare |
| Tax efficient as you don’t need to draw all of the income to achieve a higher loan size | Income structure may be too complex for high street lenders |
If you’re also worried about how a recent change in your work or income might affect your mortgage options, take a look at our guide on getting a mortgage after changing jobs.
Why work with a mortgage broker if you’re self-employed
Getting a mortgage when you’re self-employed doesn’t have to be harder. We’ll just take a slightly different approach.
Lending criteria vary, and no two lenders treat sole traders and company directors the same. That’s why working with a broker who understands self-employed mortgages inside out can save you time, stress, and often money.
Any good mortgage broker will get you a mortgage, but a great mortgage broker like the team here at Simmonds Mortgage Services will:
- Explain exactly how lenders assess your income
- Identify which lenders suit your business structure
- Ensure your documents are prepared correctly
- Present your income in the most accurate and lender-friendly way
- Navigate specialist lenders if mainstream lenders aren’t the right fit
- Help you avoid delays, declines, and the frustration of repeating the mortgage application process
- Be there every step of the way so you don’t have to figure it all out on your own
Speak to Simmonds Mortgage Services today to find self-employed mortgages that work for you
Looking for a sole trader or limited company director mortgage? Simmonds Mortgage Services is here to make your mortgage journey simpler. We listen to your situation, break down your options, so you know what you’re getting, and match you with the right lender for your income and goals.
We serve clients across Berkshire, Oxfordshire, Surrey, Hampshire, London and nationwide, but whatever you need, we’re always just a call away.
Book your meeting today, and let’s find you the mortgage you deserve.
Frequently asked questions about getting a mortgage whilst being self-employed
How many years of accounts do I need?
It’s usually two years of accounts for self-employed mortgages, but some lenders will accept one year, especially if business is good.
How does taxable income affect my mortgage application?
Your taxable income is the main figure most lenders use to work out how much you can borrow. If you’re a sole trader, that’s usually your net profit, and if you’re a limited company director, it comes from your salary and dividends. Some lenders will look at your business profits too.
Basically, the higher the income you show on paper, the more you can usually borrow, but we’ll help you work it all out.
Will bad credit stop me from getting a mortgage?
Your credit report is one of the first things lenders look at, and if it’s not up to scratch, you may find it more challenging to get a mortgage. That said, it isn’t impossible. We often help clients who are worried about their credit rating by finding lenders who are more flexible with complex cases.
