Self Employed-No Problem
Is it harder to get a mortgage if you’re 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. But getting a mortgage when self-employed can be straight forward.
There are plenty of ways to prove to a mortgage lender that you have a reliable income, it’s usually just a case of jumping through a few extra hoops.
What counts as self-employed?
Lenders will view you as self-employed if you own more than 20% to 25% of a business, from which you earn your main income.
You could be a sole trader, company director, or contractor.
How do you get a self-employed mortgage?
If you’re self-employed and looking for a mortgage, you will, in theory, have access to the same range of mortgages as everybody else and you’ll need to pass the lender’s affordability tests in the same way as any other borrower.
But because there is no employer to vouch for your wage, self-employed people are required to provide far more evidence of their income than other borrowers.
Since the introduction of the Mortgage Market Review in 2014, mortgage providers have considerably tightened up their lending criteria and need to be convinced you can afford your mortgage before they agree to lend you the money.
What will I need to provide for a self-employed mortgage?
To prove your income when you apply for a self-employed mortgage, you will need to provide:
- Two or more years’ certified accounts (We can work with just 1 year in certain circumstances)
- SA302 forms (Tax Calculation Form) and Tax Year Overview’s (from HMRC) for the past two or three years
- Evidence of upcoming contracts (if you’re a contractor)
- Evidence of dividend payments or retained profits (if you’re a company director)
Lenders also prefer self-employed mortgage applicants to provide accounts that have been prepared by a qualified, chartered accountant; that way they can be sure of your reliability. It’s likely that they will focus on the average profit you’ve earned over the past few years but again we have lenders who will assess on your most recent accounts if a higher income is shown. Post Covid-19 we have some lenders that will disregard 2020-21’s accounts totally if your business was affected.
If you only have accounts for one year or even less, you may find it a challenge to convince a lender that you can afford to repay a mortgage – but, again, it’s not impossible. Having evidence that you’ve got regular work or providing proof of future commissions may help.
Just be aware your choice of mortgages may be more limited.
Having a healthy deposit and a good credit history will also help your chances of securing a mortgage when you’re self-employed.
Can Mortgage Solutions help?
We are experts in obtaining mortgages for the self employed. With 25 years plus of advising our clients we know exactly how every lender treats the income from a sole trader, partnership or a company director.
We have lenders that will accept just 1 years trading accounts as proof of income and others that will allow flexibility by using net profit after tax for clients with Limited Companies. No two self employed cases are the same.
That expertise is at your fingertips, contact Mortgage Solutions today.
A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
