Self Employed Mortgages

If you're self-employed, you know that the challenges of running your own business can be endless. From finding clients and managing finances, to handling paperwork and meeting deadlines, there's a lot to keep track of. And when it comes time to apply for a mortgage, the process can be even more complicated.

The good news is that you can get a mortgage as a self-employed individual. You'll just need to take some extra steps to make sure you meet the requirements.

Working with an experienced mortgage broker who specialises in loans for self-employed mortgage applicants can make the process of getting a mortgage much easier. They'll be able to answer any questions you have and guide you through the application process.

If you're self-employed and looking to buy a home, follow these tips to make the process as smooth as possible. With a little preparation, you can get the financing you need to make your dream of homeownership a reality.

What being self-employed means for your mortgage

When you're a self-employed person, you don't have the same steady income as someone who is employed by a company. This can make it more difficult to qualify for a mortgage because mortgage lenders like to see evidence of a consistent income.

That said, there are a few things you can do to make sure you're in good standing when applying for a mortgage:

1. Keep good records

One of the most important things you can do when applying for a mortgage as a self-employed individual is to keep good records. This means tracking your income and expenses and keeping documentation of both.

Mortgage lenders will want to see this information in order to get an accurate picture of your financial situation.

2. Have a strong credit score

Another important factor in qualifying for a mortgage is your credit score. Mortgage lenders will use your credit score to determine how likely you are to repay your loan. If you have a strong credit score, you're more likely to have your mortgage application approved and qualify for a better interest rate.

3. Show proof of income

When applying for a mortgage, self-employed applicants will need to show proof of income. This can include tax returns, profit and loss statements, and bank statements. Lenders will use this information to verify your income and get an idea of your financial stability.

4. Save more towards a deposit

If you're self-employed, you'll find it easier to get a mortgage if you have a larger deposit saved up. This is because self-employed applicants are typically considered to be of higher risk by lenders. Having a larger deposit will help offset this risk and make it more likely that your mortgage application will be approved.

How much can I borrow with a self-employed mortgage?

The amount you can borrow with a self-employed mortgage will depend on a number of factors, including your income, debts, and credit score. In general, the higher your income and credit score, the more money you'll be able to borrow.

It's important to remember that the amount you're approved for is not necessarily the same as the amount you can afford. Just because you're approved for a certain loan amount doesn't mean that's what you should borrow. Be sure to consider your other debts and expenses when deciding how much you can afford to borrow.

Lenders will usually assess self-employed income in different ways - depending on whether you operate as a sole trader, partnership, or a limited company. 

Sole Trader

As a sole trader, your mortgage affordability will usually be based on your personal tax return. Lenders will look at your taxable income to determine how much money you have available to put towards your mortgage repayments. If you've been self-employed for less than 2 years, some lenders may require additional documentation, such as bank statements or a letter from your accountant.

Partnership

If you're a partner in a business, your mortgage affordability will usually be based on your share of the business's net profit. Lenders will look at your personal tax return to determine how much income you have available to put towards your mortgage repayments.

Limited Company

If you're a director of a limited company, your mortgage affordability will usually be based on your salary and dividends. Lenders will look at your personal tax return to determine how much income you have available to put towards your mortgage repayments.

What evidence will I need to provide?

The main evidence self-employed people will need to provide is their tax returns. Lenders will want to see at least two years’ worth, and sometimes up to five.

Some lenders insist that accounts are prepared by an accountant who is chartered or certified, so bear that in mind if you’re looking to appoint someone to help you with your paperwork.

Things you might need to have to hand:

• Two or sometimes three years’ worth of accounts prepared by an accountant -
• Your SA302 self-assessment forms
• Your annual accounts or tax return
• Bank statements
• Proof of business address
• Details of any business loans or personal debt
• Proof of identity
• Proof of your deposit

Remember, the more evidence you can provide to show a lender your income is both steady and reliable, the more likely you are to be accepted for a mortgage.

What if I'm newly self-employed?

Don’t have two or three years’ accounts? Don’t despair!

Certain lenders may still be prepared to offer you a mortgage, particularly if you can prove that your business has plenty of work going forwards, or if you can show you have only recently left full-time employment but will be continuing in the same industry as a contractor.

If you’re in this situation, it’s always worth speaking to a mortgage advisor to see what your options are. They’ll be able to tell you which lenders are most likely to accept your application and help guide you through the process.

Get in touch with one of our advisors today on 0800 093 4914.

Can I get a self-employed mortgage with bad credit?

If you have bad credit, you might find it more difficult to get a self-employed mortgage. This is because lenders will see you as a higher-risk borrower, and so may be less likely to offer you a loan.

There are some specialist bad credit lenders who may be willing to lend to self-employed borrowers with bad credit. However, the interest rates on these loans are likely to be higher than those offered by mainstream lenders.

If you have bad credit and are self-employed, it’s always worth speaking to a mortgage advisor to see what your options are. They’ll be able to tell you which lenders are most likely to accept your application and help guide you through the process.

Contact an Expert

If you have any questions about self-employed mortgages or would like help finding the right deal for your personal circumstances, our expert mortgage advisors are on hand to give you guidance. Give us a call today on 0800 093 4914.