Self-employed mortgages are widely regarded as being harder to obtain than mortgages for people who are employed. However we don’t think this is correct, we love helping self employed clients.
There isn’t a special product called a self-employed mortgage but for those in self-employment, there may be additional steps and checks made to validate your financial position before an offer is made. By using a specialist lender and a mortgage adviser who understands the market, you can get the right mortgage advice for your circumstances.
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Can I get a mortgage if I am self-employed?
The simple answer is yes. You can obtain a mortgage as a self-employed person as long as you have all the right paperwork and a half decent credit history.
Are there minimum requirements for self-employed mortgages?
Self-employed mortgage requirements are similar to standard mortgages but as a sole trader or freelancer who is registered self-employed, you may be asked to provide more information than if you were an employed applicant.
If you trade as a Limited Company and have at least 10-20% shareholding, you will also be classed as self employed. Lenders typically want to see two years trading history however many lenders now can look at self employed applicants with just one years trading.
What records do I need to provide?
Self-employed applicants will often be asked to provide their last 2-3 years of accounts, as well as Tax calculations and Tax Year Overview documents. However, there are some lenders who will be happy with the latest year’s accounts which helps self-employed people who have only recently started in business or working for themselves.
You will also need to provide your credit report to demonstrate a good credit history when applying for a mortgage.
- Bank statements
- Reference from a qualified accountant
- Tax returns (SA300)
- SA302 form or Tax Calculations (evidence of earnings from HMRC)
- HMRC tax year overview
- Signed contracts and day-rate evidence if you are a contractor
- Finalised and certified limited company accounts or sole trader final accounts
Application Process for a Self-Employed Mortgage
When you apply for a mortgage, lenders will consider you to be self-employed if you own more than 10-20% of the business which provides your main income. The lending criteria may be different depending on whether you are classed as a sole trader, limited company director, or contractor.
The first step is to consult with an adviser who is familiar with the self-employed market as they will be able to identify potential lenders to work with and help you with your mortgage application to maximise the chances of success.
I have received a government grant. Will this affect my self-employed mortgage application?
Since the COVID pandemic, some self-employed applicants found it more challenging in 2021 and 2022 to secure a mortgage where they had taken advantage of the SEISS (Self Employed Income Support Scheme). However, the effect of that should start to diminish over the next couple of years as business owners are able to supply real trading figures for 2023.
How many years do you have to be self-employed to get a mortgage?
Although the more years of accounts and tax returns you can provide, the easier it is likely to be to satisfy the lender that you can afford the mortgage repayments, you can obtain a mortgage offer from just 12 months' figures.
How much can I borrow with a self-employed mortgage?
The amount a lender is willing to offer will depend on your annual turnover, net profit and your monthly living expenses. Lending multiples will be similar or the same regardless of your employment status.
If you are a sole trader the lender would usually use your Net Profit, either averaged over two years or potentially taking the latest years Net Profit. They would use this figure towards working out the maximum loan.
If you are a Limited Company, a lot of lender would use your Salary and Dividends drawn over the same period towards affordability, however many lenders we work with can use your company profits and director salary towards affordability. This is great as it allows you to retain profit within the business, not pay personal tax on it but still use it towards mortgage affordability and the maximum loan calculation. Same lenders even allow things like one off pension contributions to be added back into profits for affordability calculations. Its not all black and white so you need to speak to a specialist broker.
Are options for mortgage lenders limited for those that are self-employed?
Typically there are the same amount of options available to employed or self employed clients, some specialist lenders are also available for more complex self employed incomes.
We work with the whole of the market and have a lot of experience in placing more complex cases.
Will I pay the same interest rates as other borrowers?
If a lender is happy with your finances and is willing to lend to you, you should receive the same rate as other borrowers.
How can I improve my chances of securing a mortgage?
- Saving a good deposit - at least 10% of the purchase price
- Looking after your credit score by repaying debts on time, not using more than 50% of your credit facility, having a record on the Electoral Register and not applying for additional credit in the six months before you apply for the mortgage
- Demonstrating you can meet repayments on your mortgage by not going overdrawn in your current account
- Ideally use a good accountant and keep good records
I've been turned down - where can I get help?
If you need help finding the right lender for your personal circumstances, it's a great idea to talk to an experienced mortgage adviser who can search the entire market for a product and provider who will consider your situation. Call us on 0118 469 3037 to speak in confidence about your requirements.
You might have been rejected for a mortgage before or you may have been reluctant to even try, but we can help. We treat each person who comes to us as an individual and we've secured mortgage offers for self-employed applicants who have previously struggled to obtain a mortgage. We've worked with sole traders who only have one year's accounts and achieved offers at the same interest rate as employed applicants.