Self-Employed Mortgage
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Self-Employed Mortgage
Is it harder to get a mortgage if you are self-employed?
It’s not harder, it’s just more technical. Lenders will look more closely at your income documents. They will want to verify if you’re a limited company, a sole trader or a partnership, they will want to verify the strength of the business and see if your income is sustainable.
Whether you’re a sole trader or a partner or you get income from pensions, you have to declare them on self-assessments. You might get income from rental properties, which is also declared via self-assessment. We can get details on all these types of income from your tax return and use them towards getting a mortgage.
Every lender has its own criteria policies – and we’re the experts dealing with the lenders day-in, day-out. We’ll know who we can go to for the maximum affordability for your goals. We do all the research to take the pain away, which is why we ask so many questions upfront.
What if I only have one year’s accounts? Can I still get a mortgage?
Yes, you can. We will be more nosy to get more information, we will ask you what you’ve been doing in your past employment – were you in the same line of work? If we can establish a track record and that your income is consistent, it shouldn’t be a problem.
There are lenders who do have the appetite for people with one year’s accounts and even brand new businesses. They are a bit more niche than those that support self-employed clients or limited company directors with more than a year’s accounts.
Are self-cert mortgages still available?
Self-cert mortgages haven’t been around since 2009. When they were available, the applicant would self-declare their income to the lender, and they wouldn’t need any proof of Income.
That’s been scrapped, so there are no self certs out there. Everything’s based on affordability and proof. The lenders want to know that you’re able to sustain your monthly mortgage payments.
Can you get a joint mortgage if one person is self-employed?
Yes, and it’s pretty easy. We just take both sets of income into account. If one of the applicants is employed, we take their employed income, then we apply the self-employed policy or criteria from the lender to get the mortgage.
We would also talk to you about the maximum affordability you’re looking for. Are you looking to buy a specific property? We’ll work to get you the money you need in the most affordable way.
Is Buy to Let available for the self-employed?
100% yes – we just need to prove income. We will ask for your income documentation and apply the lender’s policy. Certain lenders require a minimum level of income, while others don’t.
The process is the same as when obtaining a residential mortgage. We ask you everything about yourself, your income, and how it’s made up and then apply to the lender, and take it from there.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages.
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What’s the difference between someone who is self-employed and a limited company director?
Directors of limited companies are not technically self-employed. They’re paid through the company they own. That’s usually in the form of a salary or a dividend payment. Self-employed individuals are specifically sole traders and partnerships. The difference is that they take on their own debts themselves. With limited companies, any debt or risk is limited to the company, because it is a separate legal entity.
With directors of limited companies, we will ask for a little bit more information. That’s because we can work out maximum affordability based on different income streams. If the business is profitable, we can use the company accounts, using the net profits after tax, and add back salary. Or we can use the salary and dividends from the company – whichever will best achieve your goals.
How does remortgaging work for the self-employed?
There’s no difference from a standard remortgage. We will ask you the same questions about your income and how it’s structured. We’ll ask for income documentation so we can do the research, and give you affordability figures.
We’ll ask you what you’re trying to achieve – do you need to raise capital? Or is it a like-for-like remortgage with the most suitable rate available? Then we’ll apply the income policy rules, and advise you on the options.
Think carefully before securing other debts against your home.
You may have to pay an early repayment charge to your existing lender if you remortgage.
How much can a self-employed person borrow?
Everything is based on affordability. I would say that around 85% of our customers need the maximum borrowing available. So, we will use and interpret your income, to get you the most suitable loan to meet your goals.
We will check everything with you and go through a budget planner so that the payments will be affordable. These are not the only costs to consider – you also need to think about your protection, general insurance, council tax…. So, we’ll sense check everything.
Then it’s a case of using your income, going to the lenders, and doing the calculations, to maximise your borrowing for your particular scenario. I would love to say it’s a multiple of your income but it’s not. It’s a lot more technical than that.
What documents do I need when applying for a self-employed mortgage?
This is all about how you prove your income. For a limited company director we would ask for company accounts from your accountant – they need specific qualifications that meet the lenders’ policies. We usually ask for two years’ worth.
We also ask for two or three years tax calculations or SA302s that summarise your tax return income. This is an official document that lenders use – then there’s also something called a tax overview, which is a summary one-page document of the taxes due and paid. Lenders just want to see if those figures all match up.
We always do some checks before submitting the mortgage application for self-employed people, looking at your full tax returns, tax calculations and tax overviews. If you’re a partnership we’ll look at partnership accounts and tax returns.
Some lenders ask for accountant certificates, in which case you can give us your accountants’ details and we can ask them to complete that. Then the standard documents are your identification, three to six months of business bank statements and your credit report. We recommend using Checkmyfile as it pulls information from the three main credit reference agencies. We’ll discuss all the details when you talk to us.
Is there anything else to consider with self-employed mortgages?
Just be prepared to answer a few questions. For company directors we can use your net profits and look at the strength of the business. We can look at all forms of income declared on your tax return including state pension, benefits, profit from UK land and property. Anything on the tax return can help towards affordability and obtaining a mortgage.
Your home may be repossessed if you do not keep up with your mortgage repayments.
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