How to Get a Mortgage If You’re Self-Employed

How to Get a Mortgage If You’re Self-Employed

Providing detailed evidence of your earnings is key

Mortgages for the self-employed are hugely important. Approximately 4.2 million people in the UK work for themselves, according to the latest self-employment figures from Statista. That means just over 10% of the country’s 41.59 million working-age adults (defined as those aged 16-64) are self-employed. And many will want to use some of their earnings to buy their own home.

Self-employment can involve working as a sole trader, in a partnership or as a director of a private limited company. If you run your own business, you’re part of a diverse, hard-working group. ‘Your working day may be much longer and more irregular than [that of] someone who isn’t self-employed,’ remarks the Prospects careers advice guide, as you’re shouldering more responsibility. Self-employment can be liberating, but it can also make some aspects of your life more complicated.

With that in mind, you might worry that moving home could be more difficult for you as someone whose main/sole income is derived from self-employment, with all its challenges and unpredictability, than for an employee who has a steady workload and fixed salary. ‘Is it hard to get a mortgage if I’m self-employed?’ is a question we often hear. Rest assured that as Devon’s largest independent mortgage broker, we regularly help people who work for themselves to find the right deal.

Identifying the Most Suitable Lender for Your Needs

Although the phrases ‘self-employment mortgages’ and ‘self-employed mortgages’ are used in the mortgage industry, there isn’t actually a specific type of mortgage for people who run their own businesses. However, there are specialist lenders who deal specifically with self-employed borrowers, so it’s worth broadening your search for an appropriate mortgage product rather than restricting it to mainstream lenders.

If that sounds daunting, don’t worry – we can do the legwork. As an independent mortgage broker, we’re not tied to a particular lender. We can perform a comprehensive search of the UK mortgage market with your needs in mind then discuss suitable products with you.

If you apply for a mortgage, we can offer expert guidance throughout the process.

A Good Track Record Strengthens Your Position

People who’ve successfully earned a living by working for themselves for at least a couple of years tend to be well established in their chosen field. That can put them in a relatively strong position when applying for mortgages. It’s not impossible to get a mortgage if you haven’t been self-employed for long, but having a proven track record of success is advantageous.

That’s because lenders want to be satisfied that self-employed mortgage applicants have a reliable income and healthy business. In a nutshell, they want to make sure you can afford to repay the loan.

Providing Evidence of Your Earnings

Years ago, the self-employed could ‘self-certify’ (i.e. tell lenders how much they were earning without needing proof). But these days self-certification isn’t permitted.

Without financial documents from an employer, such as payslips, how can you provide a lender with the information they require to assess your financial position and perform mortgage affordability checks?

The way forward is to ensure your accounts from the last two tax years are accurate, complete and certified by an accountant. The lender will probably also want to see evidence of your earnings for the last four years presented as an SA302 document, plus a tax year overview (both can be obtained from HMRC). You’ll also need documents showing your dividend payments, retained profits and upcoming contracts, if applicable.

A Detailed Picture of Your Financial Affairs

Because people who work for themselves tend to experience more ups and downs than, say, employees in predictable, nine-to-five desk jobs, a lender may regard mortgages for the self-employed as more risky. But with careful preparation, you can encourage them to look more favourably on you.

Showing the lender concrete evidence of your income and tax position can be invaluable. A good credit history is also beneficial – lenders look for reliable borrowers. Plus, if you’ve saved a substantial deposit in anticipation of moving home, the lender may be inclined to offer you a more attractive deal than if you need a mortgage that represents a greater proportion of the property’s value.

Essentially, if you can present the lender with a detailed, accurate, positive picture of your financial affairs, being self-employed is unlikely to hold you back when seeking a mortgage.

Supporting Self-Employed Devon Home Buyers

Choosing an independent mortgage broker when you’re moving home means you’ll have access to insightful, impartial advice every step of the way.

Self-employed and need a mortgage? Contact The Mortgage Shop in Devon today.

Standard Health Warning & Regulatory Statement

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured against it. All loans subject to status. Ask for a personalised illustration. You may be required to pay a broker fee depending upon the type of mortgage recommended. Registered in England and Wales 3110231 – Registered Office: Sommerville House, 30 Southernhay East, Exeter, Devon EX1 1NS. The Mortgage Shop is a trading name of The Mortgage Shop (Exeter) Limited which is authorised and regulated by the Financial Conduct Authority. FRN 302305 Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.