How To Get A Mortgage When You’re Self-Employed

How to get a mortgage when you're self employed

You may have to jump through a few more hoops, but getting a mortgage when self-employed usually isn’t as difficult as you might imagine. The application process for a mortgage for self employed people isn’t too different from what any other applicant would go through – although you will need to provide some proof of self-employment, and demonstrate your incomings and profits. Read our guide on how to get a mortgage when self-employed, with top tips on how to get approved, and find out everything you’ll need to take to a lender.

In this guide:

What is a self-employed mortgage?

Typically, a lender will class you as self-employed if you own 20 to 25% (or more) of a business, whether you’re a sole trader, company director or a contractor. There aren’t set self-employed mortgage rates, but getting a mortgage when self-employed is a little bit different than someone that’s traditionally employed, as you don’t have an employer to vouch for consistent earnings.

Can I get a self-certified mortgage?

Until 2014, self-certification, or ‘self-cert’ mortgages were specifically created mortgages for self-employed people. This kind of mortgage allowed you to simply provide proof of your earnings in a given year, and made it a lot easier to get a mortgage if you were self-employed. These were ended due to worries that they were being too widely sold – and that mortgages for self-employed people were being approved when they couldn’t actually afford them.

How do I get a self-employed mortgage?

You’ll need a little extra documentation compared to someone who’s traditionally employed, and lenders will assess you mostly based on your profits, not necessarily proof of self-employment.

The main issue is not necessarily proving your total income – rather, it’s proving how much you can safely borrow on a mortgage, instead of taking on more than you can afford. Common knowledge has it that a lender will need at least three year’s accounts and proof of income, but this isn’t always the case – while banks will probably prefer to see an application with at least two years, in some cases they may be happy to discuss an application with as little as one year depending on your circumstances.

What documentation do I need for a self-employed mortgage?

For a self employed mortgage, you’ll need to provide the following:

  • Two or more years of certified accounts
  • A tax year overview from HMRC or SA302 forms, for the last two to three years
  • Proof of upcoming work/contracts if you’re a contractor
  • Evidence of retained profits or dividend payments for company directors

Apart from this, you’ll need the usual elements you’d expect for anyone applying for a mortgage:

  • A decent credit history
  • A good deposit. Having a higher deposit may also help your chances of being approved for a mortgage – check out our guide on buying a house with a lower deposit for more information.
  • Council tax bills and recent utility bills
  • Passport
  • Driving license
  • Six months of bank statements

Where can I go to get a self-employed mortgage?

There aren’t set self-employed mortgage rates – you should be able to get a mortgage from any of the mainstream lenders, and get access to all of the standard mortgages including fixed and variable rates. However, if you have any concerns or a slightly more complicated case, it may be worth seeking out specialists who specialise in self-employed mortgages, and assess on an application-by-application basis instead of using a set calculation to check your eligibility. It may be worth checking with mainstream lenders what their requirements for proof of self-employment are, and the best self-employed mortgages they can offer, before looking to a specialist.

Helpful tips for getting approved

If you’re self-employed and want to get onto the property ladder, these tips could help to increase your chances.

Lenders will look at your average profit

If you’ve had highs and lows of income and your earnings vary dramatically from year to year, you might need to provide more evidence to a lender. Lenders will look at your average profits, so if the previous year has been a little bit leaner, you may need to prove that you can guarantee future income, with proof of new clients, or contracts. Alternatively, proof that you have a significant amount of savings (separate from your deposit) may help to get you approved for a self-employed mortgage.

Use an accountant

Lenders prefer to see accounts that have been provided by a qualified accountant, so if you do your own accounts, this is something to bear in mind. Some lenders won’t even consider mortgages for self-employed people whose accounts haven’t been signed off by an accountant – and make sure your accountant is certified or chartered.

Get prepared well ahead of time

Requesting a hard copy of SA302 forms can take a few weeks. As getting a mortgage when self-employed can be a bit more complicated, it’s worth taking the time to make sure everything is in order so there’s no confusion for your application. Also remember that if family members are contributing towards your deposit, they’ll need to declare this.

Get expert help

If you’re really struggling – maybe you don’t have two to three years of accounts to submit, or a complicated set of earnings and dividends – it may be worth getting a financial adviser or mortgage broker who can help clear up exactly how to get a mortgage when self-employed, and even advise on the best lenders to approach.

Take a hard look at your credit score

As getting a mortgage when self-employed can be tricky, you should make sure you’re going in with the best possible preparation – and like any other mortgage, your credit history is a big part of this.

  • Make sure you’re on the electoral roll
  • Check your credit file – but don’t make too many checks in a short space of time!
  • Don’t let any credit cards reach their limit
  • Avoid making just the minimum payments on credit cards

Applying for a mortgage when you’re self employed can be daunting – but follow this guide, and as long as you’re well prepared, hopefully things will go smoothly. Just make sure your application is as bulletproof as can be, have your forms and deposit ready to go, and soon you’ll be in your dream home! For more financial tips and ideas, check out the other guides on our blog.

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