In this video today, we will be talking about being self-employed as a first-time buyer. Essentially, a self-employed mortgage is exactly the same as an employed mortgage.
The only difference is that when you are employed, the lender would want to see the last three months' worth of pay slips. However, when you're self-employed, the lenders will want to see a couple of different documents to get yourself agreed for a mortgage.
Depending on how your business is set up, lenders will assess things slightly differently when you get a mortgage as a self-employed first-time buyer.
If you're a sole trader, the lender will want to see a minimum of one year's accounts. However, the majority of lenders would like to see two years. The more income you have being a sole trader and showing your consistency in earnings, the easier it is to get a mortgage, and the more options you have.
If your business is set up as a limited company, lenders assess this slightly differently from being a sole trader. This is different as most lenders would allow you to calculate your affordability based on the dividends you've withdrawn from the company and the salary you've paid yourself.
There are, however, some lenders that will allow you to use the net profits that the company earned last year and the director's salary. Doing this way tends to give you a slightly higher borrowing, depending on how you've set up your accounts. If you own 50 percent of the business, they would only use 50 percent of the net profit for your affordability.
As we mentioned earlier, the main difference between an employed mortgage and a self-employed mortgage is how you prove your income. The documents the lender would ask for depends on how your company is set up. Lenders want to see the last two years' company accounts if you're a limited company director.
These are accounts that have been created by your accountant and that have been submitted to HMRC. They would also want to see an SA302 and tax year overview. Click Here To Find Out More About SA302's.
If you're a sole trader, they would just like to look at your SA302 and tax year overview. Lenders would also want to have a look at the business bank accounts.
So, if you're a limited company, they would like to look at the last three months' worth of business bank accounts to ensure the business is generating income. Some lenders will also want to see an accountant's certificate. This is a document that the lender will request from your accountant. This form will ask your accountant to verify the income that you've earned.
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