Self-Employed Mortgages

Did you know there are more than four million Self-Employed people in the UK?  And that 1.5 million of them are women? 

Out of this number, many will be homeowners with mortgages. That’s in spite of mortgage applications being a lot more involved for people who work for themselves.

So you’re not on your own. Especially if you’ve been wondering whether you’ll be able to secure a mortgage.

Applying for a mortgage when you’re Self-Employed doesn’t have to be hard. All you need is a Mortgage Broker with a good track record of helping Self-Employed people.

An experienced Mortgage Adviser like The Mortgage Mum will do all the leg work for you.  They’ll guide you through every stage of your journey to own the home you’ve set your heart on, and find you a mortgage to match. 

So why not make a start now? Here’s our handy guide to Self-Employed Mortgages – Made Easy.

What’s a Self-Employed Mortgage?

Actually, there isn’t a specific type of mortgage reserved just for Self-Employed mortgage applicants. The difference lies in how you prove your income.

You’ll need to satisfy a lender you’ll be a reliable borrower by proving your income is steady, your expenses are reasonable and your business is a going concern.  

How will my Self-Employed application be assessed?

When assessing whether you’ll be able to afford a mortgage and how much to lend you, a  mortgage company will focus on three things:

• Your Income – how much you pay yourself each month
• Business Expenses – evidence of your expenses and operating costs

• Business Security – your ability to keep trading  

Depending on the complexity of your business, a lender may refer you to their underwriter for individual assessment. You may be asked to provide in-depth information to substantiate your application.

What information will I need to provide?

Once upon a time lenders would accept your word as proof of Self-Employed income.  Known as ‘self-cert mortgages’, these were banned by the Financial Conduct Authority, now mortgage lenders require evidence.

Tell your accountant you’re planning to buy a property and will need to apply for a mortgage.  That will give them time to prepare the documentation for you well beforehand. 

In general, you will need to have been trading for at least three years, and have two years of accounts less than 18 months old. You’ll also need to provide bank statements.

Your accountant can request your SA302 documents from HMRC that confirm your declared income and tax paid.

More specifically, the type of information you’ll be asked for will depend on your Self-Employed status.

• Sole Trader – lenders will base their calculations on your SA302 and your expenses.
• Partnerships – are treated the same as Sole Trader businesses.  Lenders will want to know your share of profits.    

• Limited Company – lenders will take both your salary and dividends you’ve drawn into consideration when calculating your income and how much to lend you.
  You’ll also need to produce three years worth of limited company accounts. Some lenders will take both your salary and net profit into account, if this is more beneficial. However, you should consider that not all lenders will do this so it is important you consider this when drawing income from your business. Your Mortgage Adviser can give you guidance on this.