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Agreement in Principle Self-Employed image

Agreement in Principle Self-Employed

Anthony McQuilliam explains how an Agreement in Principle works if you are self-employed.

Podcast approved by The Openwork Partnership on 12/09/2025.

Can you get an Agreement in Principle (AIP) if you are self-employed?

Yes, of course. Getting an Agreement in Principle when you’re self-employed is vital before you go out and start looking at properties. There’s nothing worse than falling in love with a property, then realising you can’t actually afford it.

On the flip side, you might be pleasantly surprised to find you can borrow more than you thought. You might have been looking at properties far below the quality you can actually buy. You just need to sit down with someone to get that Agreement in Principle nice and early.

It also gives you a bit more of a leg up against people without one. If you’re trying to negotiate a price on a property and you’ve got your Agreement in Principle upfront, it makes things a lot easier for you.

Is it harder to get an Agreement in Principle if I’m self-employed?

Not if you’re speaking to the right person. There’s a massive misconception that it’s hard to get a mortgage when you’re self-employed. It’s not – it’s just all about preparation.

As long as you’ve been in business for a minimum of 12 months and you’ve got good credit, it should be no more difficult than for an employed person to get an Agreement in Principle.

How is variable self-employed income assessed for an Agreement in Principle?

By its nature, self-employed income is usually variable. Because of that, lenders want to see a longer trading history to document how much you earn.

If you’ve been working for at least 12 months and you’ve got the last 12 months’ tax calculations and tax year overviews, you’re still going to be able to get yourself a Mortgage in Principle with a few lenders.

Even though the income varies, they look overall at 12 months. But if you have two years’ worth of trading, that opens up the vast majority of lenders to you.

Can I use more than one source of income to apply for an AIP?

Yes, you can, subject to where it’s from. Let’s say you are self-employed but you also rent properties out – you can use the property rental income too, subject to it having been in place for a period of time.

Also, if you’re self-employed and your partner’s employed, you’ll be able to use their income as a standard employee.

How is affordability calculated for an Agreement in Principle for self-employed borrowers?

If you’re self-employed, calculating affordability varies dramatically depending on which lenders you look at.

You could be a sole trader or a limited company director, and every lender will assess things completely differently. A good example is that with certain lenders, if you are a limited company owner and your business has earned £300,000 profit but you’ve only taken £50,000 from the business, they only use the £50,000 rather than the profits in the company.

Meanwhile with the exact same case, we could speak to a lender that will look at your net profits from the business plus the salary you’ve paid yourself. In that case your income is potentially £250,000 more than with the other lender. Because of that, you’ll be able to borrow substantially more.

What information do self-employed borrowers need to provide when applying for an Agreement in Principle?

The first thing is a credit report. We need to make sure we’re looking at the right lenders for you. If you’ve had defaults or missed payments in the past, we need to avoid any lender that will instantly kick that back for you. That’s vitally important.

To prove your income, we’ll need a few different things. First of all, your tax calculations and tax year overviews to document your personal income. If you’re a limited company director, we’ll also want to see your accounts for the last two years, if possible, or just the most recent year.

On top of that, we look at your last three months’ bank statements. If we’ve got those documents upfront and a copy of your ID, we’ll be able to go out and get you an Agreement in Principle.

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.

How reliable is an Agreement in Principle and how long is it valid if I’m self-employed and my income changes?

Technically most AIPs are valid for three months. But when you’re self-employed, your income changes in line with your tax year. Once you’ve put through a new set of accounts, we need to use those, as in theory, any previous Agreement in Principle will be null and void.

When we submit the full application to a lender, they always want the most up-to-date documents. Usually an AIP lasts three months if nothing changes, but if they do, we need to rerun the figures for you.

With regards to reliability, as long as we’ve got all the correct information upfront, an Agreement in Principle should be reliable. Otherwise people will offer on properties they can’t afford, so they are usually relatively accurate.

When you submit the full application to the lender, they always assess the case on an individual basis. Although you may have an Agreement in Principle, it’s not 100% guaranteed that the amount is exactly what they would lend. That said, it’s usually quite accurate if all the data’s been keyed correctly.

Will I need a credit check? Does a Decision in Principle or AIP affect credit score?

To run an Agreement in Principle, lenders need to do a soft credit search, which means checking your credit file to decide whether to lend or not. Without doing credit checks on the front end, they could end up declining the final application.

Most lenders do a soft search which doesn’t have an impact on credit score. The hard searches that some lenders do can have more impact on your credit score. In the short-term it could drop your score, but in the long-term it won’t make too much difference.

As long as you’re up to date with your bills, after a hard search your score starts creeping back up over the following months.

How do I apply for an Agreement in Principle if I’m self-employed? How long does this take?

You can speak to your own bank or building society, but there’s a chance their criteria doesn’t favour self-employed income, especially if you’re a sole trader, a limited company director or you only have a year’s trading.

It’s well worth speaking to a mortgage broker who specialises in self-employed applicants. We know straight away, before we’ve even had a conversation with you, which lenders to go to based on your self-employment setup.

It’s worth having those conversations long before looking at properties, because it puts you in a position to know what your property budget is. You’re not going to be under or over budget on the properties you’re looking at.

It also puts you a step ahead, as a lot of other buyers won’t have done this. If you make an offer on a property for £300,000, you’ve got your Agreement in Principle and you know which solicitor you’re going to use, nine times out of 10 your offer will be chosen over one from someone who doesn’t have everything all prepared.

How can a mortgage broker help here? Is there anything else we need to know?

Unless you know what you’re doing, it’s like throwing stuff at a wall and hoping it sticks. You could be speaking to a lender that needs three years’ accounts, or a lender that will take the average of your last two years – even if your business is skyrocketing in profitability. If that’s the case, by using the most recent year you’ll be able to borrow a higher amount.

Or, you could be looking at a lender that only assesses what you’ve taken from the business, not the overall profit. Speaking to a broker upfront who knows all this criteria can save you a lot of headaches.

Most importantly, if you’re self-employed you’re busy running a business. A broker will save you a lot of time. If you speak to five or six lenders on your own, it could take you hours to book appointments and go through the process.

A broker can have just one conversation with you and do all of that legwork on your behalf – saving you time and effort and actually letting you focus on your business.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Approved by The Openwork Partnership on 12/09/2025.

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