Can I get a mortgage if I'm Self-Employed?
If you’re self-employed, it can be more of a challenge to get a mortgage because you’ll need to prove you have a reliable income however with the right advice getting a mortgage when self-employed can be less stressful.
There are plenty of ways to prove to a mortgage lender that you have a reliable income whether you are a sole trader, Limited company director or in a partnership.
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Self Employed Guide
What counts as self-employed?
If you own more than 20 percent to 25 percent of a company from which you receive your primary income, lenders would perceive you as self-employed. You may be a sole trader, director of a company or a contractor.
How do you get a self-employed mortgage?
You will in principle, have access to the same choice of mortgages as anyone else if you are self-employed and applying for a mortgage and you will need to pass the affordability checks of the lender in the same manner as any other borrower.
But since there is no employer to vouch for your salary, it is important for self-employed individuals to have much more evidence of their income than most borrowers.
What do I need to provide for self-employed individuals?
To prove your income when you apply for a self-employed mortgage, you will need to provide:
Two or more years’ certified accounts.
Copies of SA302 (or summary of the tax year from HMRC) over the last two or three years.
Proof (if you're a contractor) of future contracts.
Evidence of dividend payments or retained profits (if you’re a company director)
Lenders often prefer to have accounts compiled by a qualified, chartered accountant to self-employed mortgage applicants as they will be more confident of its accuracy. It’s likely that they will focus on the average profit you’ve earned over the past few years.
You may find it a struggle to persuade a lender that you can afford to repay a mortgage if you only have accounts for a year or even less, but again it is possible It could be useful to provide confirmation that you have regular work or have documentation of potential commissions however your mortgage options may be more limited.
When you're self-employed, getting a sizeable deposit and a good credit background would both help your chances of obtaining a mortgage.
As well as offering proof of your income, you would also have to provide:
Licence to drive
Tax bill from Council
Utility bills that are dated within three months
Six months worth of bank statements
To make certain that you can afford your mortgage repayments, lenders may like to check your bank accounts to look at how much you spent on bills and other expenses. They can inquire about:
Travel and commuting costs
Are self-employed individuals expected to pay higher mortgage rates?
Mortgages for self-employed individuals are not necessarily more costly. You should apply for the same mortgage package as anyone with an equivalent salary in a permanent full-time position, as long as you are able to provide adequate details about your income.
It is even more probable that the mortgage rate you get will depend on the amount of your deposit, as well as your credit rating. The higher you can set down as a deposit, the lower your interest rate is going to be and the stronger your credit rating.
However if you are struggling to get approved by a major bank, you will have to apply to a specialist lender dealing with self-employed borrowers, and you will find that the prices can be higher.
Your first step should be to contact a mortgage advisor who can help with the process from the beginning. We can provide expert advice so please get in touch to find out what we can do for you.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Some buy to let mortgages are not regulated by the Financial Conduct Authority.