Self Employed Mortgages

Find out how you can still get a mortgage if you are self-employed.

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Helping you find the right lender

Despite all the advantages of being your own boss, being self employed can still present challenges when it comes to getting a mortgage.

It’s not impossible by any means, but finding the right lender can cost you time and money. That’s where Mortgage Hut comes into the picture. We use our expertise to find the right lender and work with you to get your mortgage approved. Even the most successful business owner needs help when it comes to getting a great deal on their mortgage.

At a dedicated self employed mortgage broker, we’ll work with specialist lenders to put forward a positive case that is designed to secure approval. We’ll take you through every step of the application process, negotiating with a range of lenders to get you a bespoke deal with the right figures.

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Whether you’re a contractor who needs a mortgage based on the contract rate or you only have one year of accounts, we’ll find a lender who will assess your application on a case by case basis.

We have access to products that aren’t available on the high street for a hassle free outcome and most suitable deal for you.

Self-employed - sole trader or partner
Freelancers such as web developers, writers, tutors and translators
Contractors including IT & building contractors
Limited Company Directors

Is it harder to get self employed mortgages?

Never assume you won’t get a mortgage when you’re self employed - that couldn’t be further from the truth. If you’ve opted to go self employed for the flexibility and freedom that it can offer, you may be having a hard time meeting strict lending criteria and affordability checks, even when your business is on the up.

The good news is that there are more lenders than ever with a wide range of products that make getting self employed mortgages that are tailor made for you easier than ever before.T hat’s why it’s essential to work with a professional adviser such as the Mortgage Hut who can find the deal that is right for your circumstances.

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Ways to prove your income

To secure any financing, it’s essential that you provide proof of income. If you’re self employed, these are the most common methods:

Company Accounts

These will clarify the way your income is structured including retained profits, dividends, director’s loans and shareholders funds. Accounts also give a structured account of year end finances and an indication of financial well-being.

Salary, payslips and P60

These give detailed proof of the salary element of your income and you should always generate a year end P60 with details of gross and net income, plus any deductions.

SA302

This certificate indicates your income and expenses plus gross and net profit for the year and gives your lender the information they need to complete the affordability assessment. Download a copy when you file your online tax return.

Accountant Certificates

These are used to certify an individual's income, these can be valuable in the context of some lenders.

Documents you need to apply

If you’re looking for a self employed mortgage, lenders will expect to see the following documents:

ID with the current address if you’re using a driving licence
Proof of address in the form of a utility or council tax bill
Proof of income including P60s, SA302, and company accounts
3 months of bank statements from all relevant business and personal accounts
Deposit, usually shown by a statement of funds held
Life insurance document

Who can get a self employed mortgage?

As far as lenders are concerned, self employment can be seen as a risk for lending because it can be difficult to establish your income and some traditional lenders may assume that you may struggle to make your monthly repayments.

In fact, the self employed mortgages for which you’ll be eligible are conventional mortgages rather than a financial product specifically for the self employed, but you’ll be expected to jump through more hoops to demonstrate your financial eligibility. Once you meet those criteria, it's plain sailing.

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Expert Mortgage Advice

How will my business set up affect getting a self employed mortgage?

Proving your income is the major challenge you face when applying for self employed mortgages.

Sole Trader

As a sole trader, you may struggle with the lending criteria. If you’ve been trading for fewer than three years or even if you experience one bad year, lenders may be unwilling to consider your application. A potential lender will be looking at your profits when assessing your disposable income, so if you file your tax through self assessment, make sure you keep your form SA302 handy, together with a copy of your accounts.

Limited Company

Within a Limited company will be considered as an employee and that can present some challenges when it comes to determining your overall income, particularly if you take a low salary. A mortgage lender will look at your share of the company’s profits. Make sure that your accounts clearly show your annual income.

Partnerships & LLPs

Partners in a business will be asked for copies of their accounts. If you pay yourself a basic income plus a profit share or bonus, ensure that any mortgage lender takes all your income into consideration including any profits you choose to retain in the business.

Challenges in getting a self employed mortgage

If you have a good trading history, you’re already ahead of the game. But there can be challenges to getting a self employed mortgage including: short trading history, low income from your business and personal income showing low salary.

If this is your situation, don’t panic!

These challenges can be overcome with some forward thinking and smart financial planning. If you currently take a minimal income for tax purposes, or your personal wealth is such that you take a tax-free allowance from the business, you’ll need to find a lender with experience and knowledge of complex structures.

At The Mortgage Hut, we develop relationships with specialist lenders who are sympathetic to the challenges you face in finding self employed mortgages.

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How are self employed mortgages calculated?

Different lenders will use different criteria when assessing your eligibility but in many cases, they’ll base their calculations on your average profits. Lenders may also consider you if you have a good track record or have left regular employment to start self employed work as a consultant in the same field.

Lenders will typically assess affordability on an average taken from your last 2 to 3 years of accounts. New businesses with a strong growth rate may prefer to apply based on the previous financial year as an accurate assessment of affordability.

If you have additional collateral or security, foreign income streams are available or you have secured contracts which indicate future profitability, some lenders may also be prepared to offer preferential rates.

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Your Affordability Assessment

Assuming that you have all your relevant documents and proof of income, we’ll run a complete affordability assessment in line with Government legislation. This is a process that all potential homeowners must undergo and includes details of your incomings and outgoings to make a realistic assessment of the mortgage you can afford. This means that a mortgage could be easier to secure than you think if you can definitively show that you can make the level of mortgage repayments expected of you. Use the Mortgage Hut calculator to assess what you can reasonably afford.

The affordability assessment will take the following information into account:

Your self employment status and level of income
The money you hold in your bank accounts and whether there has been any suspicious activity
Your credit score and overall credit report
Your level of debt
Whether you live off an overdraft or can manage within your means
Your level of savings and whether you save regularly
Your regular outgoings including rent, holidays, childcare and professional memberships

How to improve your chances of getting approved

Lenders don’t always rely on algorithms and number crunching to influence their decisions. As a successful self employed person, smart forward planning is critical for success.

Check your credit score record for any adverse notices and make sure you’re on the electoral roll as this counts towards your credit score. Avoid payday loans as these paint a poor picture of your finances and some lenders will automatically decline an application if you’ve used this type of loan.

If you hit the limit with your credit card then you’ll automatically lower your credit score. Avoid making minimum payments but try and spread the balance over two cards and look for interest free deals. Your lender may also wish to look at last years accounts or those covering up to the last 18 months. It's also important to ensure that all outstanding debts are paid and use direct debits to manage your outgoings.

Find your ideal self employed mortgage at the Mortgage Hut

If you’re looking for self employed mortgages, the Mortgage Hut can make your dreams of buying property a reality. Whether you’re a first time buyer with a startup or a leading barrister, we can help you to navigate the process of applying for a mortgage quickly and easily. We’ll take the hassle out of finding the right deal and lender for you.

If you need help finding a flexible mortgage provider who can save you time and money, the search ends here. Why not call The Mortgage Hut today on 0300 303 2640 or request a call back and we’ll use our experience and expertise to get the right self employed mortgage for you.

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