Self-Employed Mortgages
- A team of down to earth mortgage advisers
- Working for you to find the right lender from a huge panel
- Designed to save you time (and a few headaches!)
- Experienced in Bad Credit Mortgages
Get in touch for an initial fee free, no-obligation chat with an adviser about the most suitable mortgage option for you.
The Financial Conduct Authority does not regulate some Buy to Let Mortgages.
Your property may be repossessed if you do not keep up with your mortgage repayments.
Self-Employed Mortgages
- A team of down to earth mortgage advisers
- Working for you to find the right lender from a huge panel
- Designed to save you time (and a few headaches!)
Get in touch for an initial fee free, no-obligation chat with an adviser about the most suitable mortgage option for you.
Your property may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate some Buy to Let Mortgages.
Self-Employed Mortgages
All about self-employed mortgages with Anthony McQuillium.
Is it harder to get a mortgage if you’re self-employed?
In theory it’s very similar to getting a mortgage if you’re an employed person. Lenders still want to check your credit score and that you have sufficient deposit. The main difference is that if you’re employed they would look at a shorter period of your income.
Typically they will ask for the last three months’ pay slips, whereas when you’re self-employed a lot of lenders want to see that the business you run is sustainable. So rather than looking at your last three months’ income, they’ll look at the last year, two or sometimes three years of self-assessment returns, to assess the long term sustainability of the business.
What if I only have one year’s accounts, can I still get a mortgage?
Yes, of course, although it limits your options because some lenders prefer to see the business is sustainable over a longer term. But a lot of lenders will just look at your most recent year’s accounts – or if you’ve only been self-employed for one year they’d be comfortable to use that for your mortgage.
There’s a big misconception that you need three years minimum to get a mortgage agreed – you can get a mortgage being self-employed with just one year’s accounts.
Are self-cert mortgages still available?
No, they’re not. These stopped a long time ago, after the last crash I believe. With self-cert mortgages people could just state how much they earned and sign a form to confirm it – without any proof. So, as you can imagine, that didn’t end well. People were borrowing a lot more than they should and were badly affected by the market crash back in 2008.
Can you get a joint mortgage if one person is self-employed?
Yes. If one person is self-employed and one is employed, lenders would look at the employed person’s last three months’ payslips and for the self-employed person they look at your accounts.
They might look at the last year’s performance or take an average of the past two years. If you earned £50,000 one year, for example, and £100,000 the following year, your average income would be £75,000. The lender might use that as your income for the affordability calculator, on top of whatever the employed person’s income is.
Is Buy to Let available for the self-employed?
With Buy to Let, the income and the affordability tests are not just solely about your own personal income. They’re also based on what the lender believes the property would rent out for. The aim is that the rental income would more than cover the mortgage payments, allowing for any potential increase in interest rates in the future.
So it’s not so much based on your personal income, and if you’re self-employed, many lenders will accept you. There’s no minimum income requirement for some Buy to Let mortgages, so it shouldn’t have any impact on you getting a mortgage.
Your property may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages.
Speak to an expert
Our highly experienced Advisers are ready to help you with either buying or remortgaging a home, protecting your property and lifestyle along with saving you time and effort, ensuring you have a competitive deal right for you.
What’s the difference between someone who is self-employed and a limited company director?
There are quite a few differences and it will also depend which lender you speak to.
Whether you are a sole trader or you’re running a limited company, a lot of lenders will want to see your personal tax calculations and your tax computations alongside it. As a sole trader that’ll show your business profit on a year-to-year basis.
For a limited company it will show the salary you pay yourself and any dividends. So if you’re looking at a lender that looks at what you’ve drawn from the business, there’s not a massive difference.
But if you find a lender that will use the net profits in the business rather than what you have drawn, that potentially does allow you to borrow quite a lot more. That’s because not everybody withdraws all of the profit from the business each month – so that net profit could boost your borrowing.
How does remortgaging work for the self-employed?
Again, there isn’t a massive difference with a remortgage whether you’re employed or self-employed. One thing that happens with businesses, however, is that income can fluctuate up or down.
You may have had your mortgage agreed previously at a time when your business was making a bigger profit than it is now. If that’s the case, it may limit your remortgage options. It may mean you having to take a product transfer, where you stay with the same lender.
However, if your income is a similar amount as when you first applied for the mortgage, or it’s increased, there’s no real difference in the process. We will still start looking for offers around six months before your mortgage expires to prevent yourself from moving onto a variable rate.
How much can a self-employed person borrow?
Some lenders will be a bit more flexible with lending to someone who’s employed, whereas sometimes they put a cap on the self-employed. For example, some lenders might lend you 4.75 times your salary, but if you’re self-employed they might cap that 4.5 times.
This is why you need to speak to somebody about your situation because there is so much variation between lenders. For example, if you’ve a huge increase in your most recent year’s profits, it’s good to look for a lender that will just accept your most recent year’s accounts. If you’re a limited company director and you want to maximise your borrowing, it’s beneficial to look at a lender who’ll take your net profits before tax as your income.
So a general rule of thumb lenders usually offer you 4.5 times your annual income, but what’s defined as your self-employed income varies so much by lender. It could be most recent year’s accounts, the average of your last two years’ accounts or your net profit.
What documents do I need when applying for a self-employed mortgage?
The standard for all applications is your ID, proof of deposit, last three months’ bank statements and copies of your credit report.
When you’re self-employed, every lender would need to see the last two years’ tax computations and tax year overviews. Also if you’re a limited company director, they’d want to see the last two years’ company accounts as submitted to HMRC. They’re the main documents that you would need to prove your income.
Is there anything else to consider as someone who is self-employed?
The main difference is that rather than looking at your income from a very short period as an employed person, lenders want to see longer term sustainability and prove that your business is profitable.
So the main thing is preparation. Make sure that you have all your documents prepared up front. Speak to a mortgage adviser as early as you can, so we can have a conversation about how your income looks, how much you can borrow and any other documents that you need to prepare in the meantime.
Approved by The Openwork Partnership on Monday 24th April 2023.
Your home may be repossessed if you do not keep up with your mortgage repayments.
