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.
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.
- 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
- 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
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
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.
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
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.
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.
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.