If you’re self-employed it can be harder to get a mortgage, as lenders see you as a bigger risk. It’s certainly not out of the question, though. You’ll have access to the same range of mortgage deals as employed applicants, but the key difference is the documents you’ll need to show as proof of your income. This is where having an experienced mortgage broker in your corner can really pay off. Obviously, each case is different, and acceptance decisions are based on your own personal circumstances, including your work and financial history. Our guide to self employed mortgages explains what you need to help you through.
What is a Self Employed Mortgage?
There’s a lot of misunderstanding in regards to the self-employed applying for a mortgage. That said, the same mortgages are available to borrowers, irrespective of how they’re employed. The only difference is the way mortgage applications are assessed.
You may be considered self-employed by a lender if:
- You own shares in a business which forms your main income
- You’re a contractor or freelancer
- You’re acting as a director of a limited company
- You’re a partner in a partnership or limited company
When you are self-employed and applying for a mortgage, you’ll usually fall into one of three categories:
- Sole trader – You own the business and keep all the profits.
- Partnership – You own a company with one or more people and share the profits.
- Limited company – You have set up a company that keeps your own money separate from your business.
- Lenders will look at your application based on your business type. Freelancers can be classed as any of the above.
What will I need?
When you’re self-employed and apply for a mortgage, you’ll have to provide significantly more paperwork. This is mainly to prove your income, as an employer can’t vouch for your wage. If you’re self-employed, you’ll need to provide evidence that confirms you can repay the mortgage. This might include:
- A good credit history - this shows lenders that you can manage debt effectively by not going over your credit limit and keeping up with your repayments. The better your credit history, the more likely you’ll be approved for a mortgage.
- Proof of income – you’ll typically need to show documents that demonstrate a steady income over the past year (or preferably two or three). This can be a tax return, a profit and loss statement or anything else that shows you have regular money coming in. The majority of lenders now accept HMRC’s SA302 form as verification of income.
- Savings - these can support your case by showing that you can manage your money effectively, even if your income fluctuates.
Before applying for any mortgage, it’s important to get advice from both your accountant and a mortgage broker. A mortgage broker is invaluable when applying for any mortgage and – even more so if you are self-employed. They will understand the lenders that are willing to lend to self-employed clients, and most importantly, will be able to help you find the best deal.
For further advice and information on a guide to Self Employed Mortgages, please contact us here.
