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Self-employed mortgages
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How to get the best self-employed mortgage
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YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
The FCA does not regulate mortgages on commercial or investment buy-to-let properties.
Is it harder to get a self-employed mortgage?
It won’t necessarily be more difficult to get a mortgage as a self-employed person, compared to an employed person. But you will need to show that you have a stable and regular income.
It’s true that lenders can be more cautious with self-employed applications, and you’ll need to provide more documentation than an employed applicant. But your chances of being accepted shouldn’t be affected just because you’re self-employed.
The best way to maximise your chances of success of getting a mortgage when you're self-employed is to make sure you choose a lender that’s able to accommodate your circumstances.
Some lenders are more flexible with self-employed applicants than others, and the type and length of your self-employment can also be a factor in finding a suitable lender.
Who is classed as being self-employed?
You are regarded as self-employed for the purposes of a mortgage application if you are a:
Freelancer
Contractor
Sole trader
Limited company director (even if HMRC treat you as employed by your own company) whose main income is from a business that they own a share of 20% or more in
Partner whose main income is from a business that they own 25% or more of
How much can you borrow if I'm self-employed?
The size of the mortgage loan you can get shouldn’t be affected by how you earn your money, so, in most cases, you’ll be able to borrow the typical four and a half times your annual income.
That said, certain professionals and high net worth individuals may be able to borrow more than this, while those with bad credit may not be able to borrow as much.
The way your income is calculated is different if you’re self-employed, and it can also differ slightly depending on the type of self-employed business activity you carry out and which lender you choose.
Most commonly, an average of your annual income over a defined period of time (which varies by lender) will be used. This is simply because you don’t have a fixed annual salary.
Self-employed income usually fluctuates from year to year, so most lenders won’t want to rely on the most recent year alone to calculate your annual income.
It’s also worth looking at which forms of additional income are accepted by each lender, as not all consider bonuses and commission.
How do self-employed mortgages differ from standard mortgages?
A self-employed mortgage is not an actual mortgage product, so there is no difference.
Self-employed applicants can apply for the vast majority of mortgages that an employed applicant could. There are simply lenders who are more receptive to self-employed applicants than others.
As previously mentioned, some elements of the application process are different, such as the way your income is calculated and how you prove your income. The mortgage itself will be exactly the same.
Can I still get a self-certification mortgage?
No, self-certification (or self-cert) mortgages have not been available since 2009. The Financial Conduct Authority (FCA) banned them due to irresponsible lending practices.
What documents do you need for your self-employed mortgage application?
If you’re self-employed and applying for a mortgage, you’ll normally need:
The usual ID and address documentation needed for a mortgage application
Six months to three years worth of bank statements - and business bank statements if you run a limited company
Proof of income - which varies depending on your income type
Depending on the type of self-employment, there are further details below on the documents required.
Sole traders
One to three years of personal accounts certified by a qualified accountant
One to three years of tax calculations (also known as SA302s) or tax year overviews from HMRC
Freelancers and some contractors will also be treated as sole traders.
Directors and partners
One to three years of your personal income from tax calculations or a tax year overview plus any dividends drawn down
Some lenders may also be willing to look at retained profits, in which case you would also need to show your business accounts and tax calculations
Contractors
Proof of your day-rate
Contracts covering at least the past 12 months
Sometimes you will also need to show evidence of future contracts lined up for at least another year
This applies to contractors who aren’t classed as sole traders.
CIS contractors and those working under an umbrella company
Usually your income will be treated as employed income by mortgage lenders, so payslips covering six to 12 months are normally required
How to improve your chances of getting a self-employed mortgage
Use an independent mortgage broker – there’s no single best mortgage lender for self employed mortgages so a broker who can compare mortgages from different lenders gives you a greater chance of a successful application.
Put down a bigger house deposit – the best self-employed mortgages will be available to applicants with the largest deposit. Recent UK first-time buyer statistics found the average deposit for first-time buyers in England was £53,414 in 2022-23.
Prepare your documentation – lenders prefer that accounts are certified by a qualified accountant, so if you usually self-assess, it’s worth employing an accountant to tidy up your tax records. It’s also a good idea to have more years worth of accounts than necessary and make sure they are the most recent years, as this will help your income appear more stable.
Improve your credit score – as many lenders view self-employment as more risky, having bad credit as well could make it more difficult to get a mortgage. Be sure to check your credit reports beforehand and do all that you can to get your credit history in good shape.
Self-employed mortgages FAQs
What if I only have financial records for a shorter period of time?
There are specialist lenders that may be willing to consider your application if you can provide just 12 months of accounts, but this will certainly be easier for those in professional roles, or who can evidence previous experience in their industry prior to becoming self-employed.
Will I pay higher mortgage rates if I'm self-employed?
You shouldn’t pay higher rates than an employed person taking out the same mortgage as you. However, there are certain factors that will mean that you may not get such competitive rates, particularly if you use a more specialist lender:
You’ve not been self-employed for very long
You also have bad credit
Your most recent year’s income has fallen significantly compared to previous years
Can I get a joint mortgage if I’m self-employed?
It’s perfectly possible to take out a joint mortgage with one employed applicant and one self-employed applicant or if both applicants are self-employed.
If one applicant has a long-term stable employed income then this could even go in the self-employed applicant’s favour, as it may reduce some of the risk.
Read more
Pick one of our articles below or take a look at all of our mortgage guides.
