If you’re self-employed, it can be more challenging to get a mortgage, but it’s not impossible. You may just need a little extra evidence to prove to lenders that you’re reliable.
For the purposes of a self-employed mortgage, lenders will usually class you as self-employed if you own more than 20% to 25% of a business, and that business serves as your main source of income.
You can get a self-employed mortgage whether you’re a sole trader or a limited company, and there are specialist products available for contractor mortgages and director mortgages.
If you work for yourself, you should have access to the same mortgages and lenders as anyone else. The challenge can sometimes be proving to prospective lenders that you have a reliable source of income and are able to meet your monthly mortgage repayments. If you have an income that fluctuates month-on-month, whether due to the seasonality of your work or natural ebbs and flows in business, this may be tricky to prove.
In general, self-employed mortgage lenders will ask for proof of your income for the last two full tax years, so if you’re newly self-employed, it may be harder for you to prove your income. You’ll need to show evidence that you’ve had regular work and an income that covers the cost of your mortgage payments. It’s a good idea to get an accountant to prepare your documents for you, so lenders can be sure of the details.
If you find that you’re unable to get a mortgage with a mainstream bank, you can apply for one with a lender that specialises in mortgages for the self-employed. As a fee free mortgage broker, L&C can help you to find the lenders that best suit your circumstances, and the mortgages that you’re most likely to be accepted for.
Self-employed mortgage process
As with anyone else, a mortgage application for self-employed people starts with speaking to a mortgage broker like L&C who’ll be able to scour the market to find the best deal for your circumstances.
As a specialist mortgage broker, we can help you to determine which banks and building societies are most likely to lend to you, based on your self-employment
Self-employed mortgage eligibility criteria
Eligibility criteria vary between lenders, but you can expect to have to gather the following documents as self-employed mortgage proof of income:
- At least two full years of accounts
- SA302 forms or a tax year overview from HMRC for at least the last two years
- Evidence of your upcoming work or contracts
- If you’re a company director, evidence of dividend payments or retained profits
Lenders generally prefer that your accounts have been prepared by a registered accountant. If you have less than two years’ accounts, you should still prepare as much as you can with proof of your earnings and upcoming contracts, as well as your accounts for the last year. Not all lenders require two years of earnings for you to qualify for a mortgage, so you may still be able to secure a good deal even if you’re recently self-employed.
As well as your accounts, lenders will want to know about your other income and outgoings. They’ll ask for backdated bank statements in order to examine your monthly household costs, and you should be prepared to provide details of this.
Here at L&C, we can advise you on exactly what sort of documents and paperwork a lender will need to see before they can offer you a mortgage deal for self-employed people.
If you’re worried about whether you’ll be able to secure a mortgage as a sole trader or limited company, you can check your eligibility for a self-employed mortgage and use our mortgage calculator to work out how much your monthly repayments are likely to be.
Self-employed mortgage deals
As with any other type of mortgage, having a bigger deposit will open up a choice of better self-employed mortgage rates. And even though you work for yourself, that doesn’t mean you also need to find a mortgage all by yourself. We’ll help you to understand how you can find the best deals for your personal circumstances, and we’ll help you to jump through any hoops you might encounter when you’re self-employed and applying for a mortgage.
Self-employed mortgage repayment plan
Your repayment plan will depend on the type of mortgage you’ve taken out. If you’ve gone for a fixed-rate mortgage, you’ll have the same monthly repayments for the duration of your mortgage term, which may be 2, 5 or 10 years. This can offer some security and peace of mind as a self-employed person who has a changing income month-on-month.
If you have a variable rate mortgage, this will fluctuate each month, so you’ll pay a different amount based on the current interest rate. And if you’ve opted for an interest-only mortgage, you’ll only be paying off the interest on your mortgage each month, before needing to pay off the full debt at the end of your mortgage term.
Apply for a self-employed mortgage with L&C
Do you work for yourself and worry about getting a mortgage? It doesn’t have to be difficult with our help. We’ve got the specialist knowledge to give you self-employed mortgage advice that’s tailored to your personal circumstances, ensuring you get the best deal available to you.
Our expert advisers are on hand to talk you through all the options and support you through the application process. What’s more, our service doesn’t cost a penny, so get in touch with our self-employed mortgage advisers now to find the right mortgage for you.
