You can still get a mortgage when you’re self-employed, a freelancer or a contractor if you meet the lender’s criteria.

We specialise in acting as mortgage brokers for self-employed applicants, and have the experience and knowledge of how lenders – from the big high-street banks and building societies to smaller, more specialist lending companies make these assessments.

As an experienced mortgage broker, our expertise can help you to find the right self-employed mortgage on the market to meet your specific needs and circumstances.

Mortgage help for self-employed applicants

There are a few things to understand before we get started.

How self-employed mortgages work

You may be surprised to learn that technically there is no such thing as a ‘self-employed mortgage’. In theory, everyone with a good credit history who applies for a mortgage – whether employed or self-employed, should have access to exactly the same rates and mortgage options.

So, what makes a ‘self-employed mortgage’ different to a conventional mortgage? Ultimately, it is the way lenders view income and assess your ability to afford the mortgage. The more easily a lender can see that you will be able to keep up the necessary repayments (as well as supply the required, or greater, deposit), the more likely they are to offer a favourable deal to get your custom.

What documents do I need to get mortgage?

  • If you’re self-employed or a company director, you’ll need:
    • Last 1 – 3 years of accounts
    • Last 1 – 3 years of tax calculations and tax summaries
    • Proof of ID and address
  • If you’re a contractor, you’ll need:
    • 12 months’ contract history
    • Evidence of a current or imminent contract
    • Proof of ID and address

How is self-employment income calculated for a mortgage?

  • For soletraders, lenders will look at your average net profit before tax from the most recent 2 years
  • For contractors, lenders will look at your daily rate over at least a 46 week period
  • For limited company directors, lenders will look at your salary and dividends over the last 2 years
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Keep reading to find information on the home buying process and for answers to some of your main FAQ’s.

You can also learn about the different types of mortgages and interest rates in our guide.

Self-employed: Frequently Asked Questions

How much can self-employed applicants borrow?

Lenders can vary considerably on how they calculate an income figure for self-employed applicants. Some may base the figure on your most recent year’s declared income, others on an average of the past two or three years’ figures. Lenders may apply different criteria to how they consider direct income, salary and dividends drawn from a limited company structure, and retained profits.

In short, there is no single hard-and-fast rule as to how a lender will calculate your income figure. However, once that figure has been established, the amount you can borrow should be subject to the same lending criteria as anyone else applying for a mortgage with the same lender.

How can I prove my income as a contractor or self-employed professional?

Contractor

To prove your income as a contractor, you’ll need to provide the lender with:

  • Usually at least 12 months’ contract/employment history
  • Evidence of a current or imminent contract

There are lenders that will still consider your application if you’ve only been contracting for less than one year but can provide evidence of regular work in the same industry or role.

Self-Employed and Business Owners

To prove your income as a self-employed professional or a business owner, you’ll need to provide the lender with:

  • Evidence of at least one year’s trading
  • At least one year’s accounts that have been submitted to HMRC

How many years do you have to be self-employed to get a mortgage?

You need to have been self-employed for at least a year to qualify for a mortgage.

It is possible to get a mortgage with only one years’ worth of accounts, but it will limit the lenders available to you as most lenders generally use the last 2 years of net profits before tax to calculate what to lend to you.

Self-employed mortgages using last years accounts

Each lender will adopt a varied approach to how they use your income from self-employment in a mortgage affordability calculator. Traditionally it was considered necessary to have at least 3 years trading accounts and an average of net profit would be used. However, there are many situations where an individual’s accounts have produced a better result in the last year, be it from market expansion, growth after an initial start-up, acquisitions/mergers or successful tendering etc. If it can be confirmed that the current level of profit is sustainable and not just a “one off”, there are a number of lenders who will consider an application based on this income rather than an average.

Getting a mortgage with 2 years accounts

Some lenders may now consider an application if you have 2 years trading accounts and the associated tax calculations. Typically an average of the 2 years net profit will be used for mortgage calculation purposes. Where there is a greater deposit or equity value, lenders are likely to be more accommodating.

Our specialist advisers will be able to review your circumstances and requirements in order to recommend the best way forward.

Do self-employed applicants pay higher interest rates?

The short answer to this is no. A mortgage application from a self-employed person is the same as one from someone on a salary, and both types of applicant should have access to the same products, terms and interest rates.

The main concern of any mortgage lender, whether a mainstream bank or specialist lending company, is the applicant’s ability to repay the loan so that the lender gets their money back (plus a return through interest charged). So, the main focus of attention is on the applicant’s verifiable income.

Therefore, you should take all the measures you can to make sure you will still be offered a mortgage at a competitive interest rate. Here are a few basic tips:

Make a strong case for your business – provide copies of signed contracts or letters of intent (if you are a contractor), verified business accounts showing an upward trajectory and retained profits, and all evidence of advance orders and bookings.

Save for a larger deposit – money talks, and if you can show that you are making a substantial investment, this will lower the lender’s exposure in case anything goes wrong and it gives them more confidence in you as a borrower.

Show a clean credit history – it’s worth checking your own credit records to make sure there are no incorrect entries or old charges against your name. Or, if you don’t have a very active credit history (which can also negatively impact your credit rating), take out a credit card to use for all day-to-day expenses and make sure you pay it off at the end of the month.

Speak to one of our experienced advisers at The Residential Mortgage Hub to see what rates may be available to you and how you can make your application as strong as possible.

Can I get a self-employed remortgage?

When you remortgage, you take out a new mortgage with a new lender. So, you’ll be able to remortgage onto a new product even if you were employed when you took out your first mortgage.

Can I get a mortgage using retained profits?

If you are a business owner who hasn’t withdrawn all of the profits from your business, but have instead retained these profits within the business and are looking for a mortgage it may be difficult. Some lenders do not look at retained profits with income. Most lenders will look at a business owner’s dividend income on top of their salary to calculate their affordability.

However, if you have retained profits within the business this could work out at significantly more than your dividend income plus salary, which could mean you could afford to borrow much more. There are a number of specialist lenders who will take retained profit into account and these may be added to your salary drawings to produce a figure for mortgage calculations.

If you speak to one of our experts or complete the enquiry form we will discuss your requirements in more detail to establish the best way forward.

Can I use dividend income to get a mortgage?

Many lenders accept dividends as income. However, some do not and will look at the net profit of a company instead of the salary and dividends.

Generally speaking, if you take a regular salary from your own company plus dividends, these will be added together for mortgage calculation purposes. There may be complications if the combined drawing is greater than the net profit of the business.

You should speak with one of our team to make sure the correct figures are used and can be matched to a suitable lender.

Can I get a mortgage as an independent contractor?

It is possible to get a mortgage as an independent contractor, you just need to provide evidence of past and future work. There are even some lenders that will consider applications from people who’ve been contracting for less than a year if they can provide a track record of regular work in a similar role.

Can I get a self-employed mortgage with bad credit?

Trying to get a mortgage with bad credit can be a difficult task. Our expert Mortgage Advisers specialise in this very niche area of the market and can help you acquire a self-employed mortgage with bad credit.

We have access to not only exclusive products but in some instances also have access to specialist criteria not readily available to everyone.

Can I get a self-employed mortgage without proof of income?

Lenders will always require proof of income when a mortgage application is submitted to them. One of the key things that lenders need to assess is a potential applicant’s affordability. This has to be verified and documented. So, unfortunately income will always have to be proven.

The mortgage market is however moving towards verifying income directly with HMRC and even though this is a work in progress, there are some lenders that will not ask for proof of income for some self-employed or employed mortgage applications. As Mortgage Brokers we are still responsible for verifying and documenting proof of income prior to submitting an application to a lender. The lenders’ move towards verifying income directly with HMRC is more to save them time in their application process than actually offering mortgages that truly ask for no proof of income.

Can I get a Help to Buy equity loan if I am self-employed?

You’ll be pleased to know that being self-employed will not disqualify you from the Help to Buy scheme. As long as you are looking to buy a new-build home up to a value of £600,000, and can show you meet the criteria for income and affordability, then you are quite entitled to apply for a Help to Buy loan that can cover as much as 20% (or 40% in London) of the property’s value.

I've been declined a mortgage from my bank, can I still get a mortgage?

Being declined a mortgage by your bank is not an indication that you cannot get a mortgage. Each and every bank, building society and lending institution has its own criteria on which they lend on. They even assess a potential mortgage applicants’ credit score on their own internal scoring system.

If you have been declined a mortgage by your bank, then it is important that you try and speak to a Mortgage Broker. A Mortgage Broker will assess your situation based on your individual circumstance and then source the most appropriate lender for you. This will not only save you time, but it will also give you the peace of mind that a wide range of lenders are being looked at meaning you are in a good position to obtain a mortgage.

Can a mortgage broker get exclusive rates for self-employed applicants?

In addition to having access to many mainstream, high street and specialised lenders, deals and rates; it is highly likely that some exclusive rates and terms may be available through a mortgage broker.

As an established and experienced mortgage broker we have access to industry networks, are aware of special offers and rates perhaps known only to a few and we have strong relationships with the wide variety of lenders across the UK mortgage market – from the high street mainstream lenders to smaller lending companies and specialist providers.

Mortgage advice for the self-employed

To be able to access specialist lenders and the more flexible criteria and deals they offer, you will need to work with a professional and authorised mortgage broker.

An experienced expert adviser will have a complete understanding of the challenges around applying for a mortgage when you are self-employed, such as the right lenders to approach, the information to provide and what exactly you can do to give your application the best chance of success. They’ll conduct a thorough assessment of your circumstances, your targets for the mortgage and your requirements in the long term in order to make sure they know which lender and product to recommend.

Doing your own research into which lenders and products might be suitable for your needs can be enlightening, but will also take up a lot of time and resources. Be aware also that you will only be able to see the range of products available on the open market, and not those offered by the specialist lenders, and you may unwittingly make an application for a mortgage you believe to be the right for you, when in fact there could be better options available to you through other channels.

 

Self-employed Mortgage Advice

At The Residential Mortgage Hub, we have access to over 11,000+ mortgage products from over 90 lenders. We are confident you will be able to obtain the right mortgage to suit your needs, no matter how many hoops you might have to jump through as a self-employed applicant. Call us to see how we can help.

Important information

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount will depend upon your circumstances.

The fee is up to 1% but a typical fee is £598.