Self Employed Mortgages
Self employment is rocking in the UK, yet many mainstream mortgage providers are still less open to financing individuals who work for themselves. That is because self-employed workers are typically viewed as riskier prospects than employees with a regular, predictable income.
You can still get a mortgage when you’re self-employed, a freelancer or director of a limited company if you meet the lender’s criteria. All lenders have their unique differences in lending criteria, so if your circumstances don’t work for one lender then more often than not a different lender will be happy to lend to you.
To be able to access specialist lenders and the more flexible criteria and deals they offer, you will need to work through a professional mortgage adviser. An experienced adviser will have a complete understanding of the challenges around applying for a mortgage when you are self-employed, such as the right lenders to approach, the information to provide and what exactly you can do to give your application the best chance of success.
With access to over 12,000 mortgages through more than 90 lenders in the UK*, often getting deals on an exclusive basis, we are confident you will be able to obtain the right mortgage to suit your needs, no matter how many hoops you might have to jump through as a self-employed person.
Verifying your earnings
In order to receive approval for a self-employed mortgage, you may need to provide the following – and in some cases additional documentation:
Minimum of 1-year accounts
A good credit history (although bad credit self-employed mortgages may be available)
A minimum of 5% deposit
An accountant who can verify your accounts
SA302s and tax overview forms
Technically, a self-employed mortgage is no different from a standard mortgage. The key difference lies in how potential providers assess your suitability for their products.
How much could I borrow?
Lenders can vary considerably in how they calculate an income figure for self-employed mortgage applicants. Some may base the figure on your most recent year’s declared income, others on an average of the past two or three years’ figures. Lenders may apply different criteria to how they consider direct income, salary and dividends drawn from a limited company structure, and retained profits.
In short, there is no single hard-and-fast rule as to how a lender will calculate your income figure. However, once that figure has been established, the amount you can borrow should be subject to the same lending criteria as anyone else applying for a mortgage with the same lender.
Will I pay higher interest rates?
Not necessarily. A mortgage application from a self-employed person is the same as one from someone on a salary, and both types of applicant should have access to the same products, terms and interest rates.
The main concern of any mortgage lender is the applicant’s ability to repay the loan so that the lender gets their money back (plus a return through interest charged). Self employment by nature makes income less predictable.
Tips for self employed applicants
Keep up-to-date records and accounts. Don’t bury your head in the sand!
In most cases, the larger the deposit you can save, the better.
Hire a certified or chartered accountant to prepare your accounts and tax return.
Speak to a mortgage broker about your options.
Don’t minimise your income too much for tax purposes – it will affect your chances of getting a mortgage.
If you’re a sole trader, dig out your SA302 self-assessment forms and have them ready.
Don’t assume it’s impossible to get a mortgage if you’re self-employed – it’s not.
Having an experienced mortgage broker on side can significantly reduce the legwork you will need to put in to source your ideal self employed mortgage. We can help you find the best rates from the best lenders while also supporting you through the preparation of the application.