Self-Employed Mortgages made easy

Getting a Self-Employed Mortgage

Securing a mortgage as a self-employed individual can be more challenging than for traditionally employed borrowers, but it’s certainly achievable. Lenders often apply stricter criteria, particularly regarding proof of income, making it essential to understand the process and prepare accordingly.

In this article, we’ll explore how to get a self-employed mortgage, what information lenders require, and why working with a specialist mortgage broker can improve your chances.

Can I Get a Mortgage if I’m Self-Employed?

Yes, self-employed individuals can get a mortgage, but the process involves more rigorous checks. Lenders typically require at least two years of stable income records from multiple sources or a consistent income from one source. Some lenders might consider one year of accounts, but this could make it harder to get approved.

How Do Self-Employed Mortgages Work?

The primary difference for self-employed borrowers is how lenders assess income. Rather than a fixed salary, lenders look at your average self-employed earnings over the last two to three years. Your trading status—whether you are a sole trader, company director, or partner—also plays a role in the lender’s evaluation.

Some lenders may be more flexible towards self-employed applicants, making it beneficial to work with a mortgage broker who can help you find the best rates.

How Long Do You Need to Have Been Self-Employed?

Most lenders prefer applicants to have been self-employed for at least two or three years. However, some will consider your application after just 9-12 months, provided you can demonstrate a strong income history and stability in your industry.

Different Types of Self-Employment

Self-employment can vary significantly, and lenders often classify borrowers differently. Here are common types of self-employment:

• Sole Trader: Individuals running a business on their own.

• Director/Partner: Business owners or partners sharing responsibility for the company.

• Contractor: Workers providing services for set periods, typically classified as sole traders unless operating through a limited company.

• Freelancer: Similar to contractors, often considered sole traders.

• Agency Workers: Typically not considered self-employed unless working through an umbrella company, but they may face similar challenges when applying for a mortgage.

What Do You Need to Apply for a Self-Employed Mortgage?

To apply for a self-employed mortgage, lenders generally require:

• Proof of Income: Typically, two to three years of accounts verified by a certified accountant or an SA302 tax overview.

• Deposit: A minimum deposit of 10%, although this could increase if you have a shorter trading history.

• Credit History: Lenders scrutinize your credit history. Self-employed applicants with bad credit might need a specialist broker to find lenders willing to consider their application.

• Age Limits: Some lenders restrict mortgages that extend beyond your 75th birthday, although some may lend up to age 85 or beyond.

• Savings: Having significant savings could improve your chances by demonstrating financial stability despite income fluctuations.

How to Improve Your Chances of Securing a Mortgage

There are several ways to improve your chances of getting a mortgage as a self-employed applicant:

• Save a larger deposit—anything above 20-25% can increase the pool of available lenders.

• Prepare all necessary documents, including certified accounts and financial projections.

• Check and correct any inaccuracies in your credit history.

• Ensure you’re registered on the electoral roll.

• Consider waiting until you have at least two years of accounts available.

How to Get a Self-Employed Mortgage

The best approach is to consult a mortgage broker with experience in self-employed mortgages. We can help you:

• Prepare your documents, including tax overviews (SA302 forms) and certified accounts.

• Download and optimise your credit report, removing outdated or incorrect information.

• Identify lenders who are more favourable to self-employed applicants, especially if you have a limited trading history or poor credit.

• Secure an agreement in principle (AIP), which indicates how much you can borrow and shows sellers you are serious.

Do Self-Employed People Pay Higher Mortgage Rates?

Not necessarily. Self-employed applicants may face higher rates if they have a shorter trading history or bad credit, but rates for self-employed individuals are generally comparable to those for traditionally employed borrowers if their financial circumstances are solid.

How Much Can You Borrow?

The amount you can borrow depends on your average income over the last two to three years, typically calculated as a multiple of your earnings. Lenders usually offer up to 4.5 times your annual income, though this can vary based on the lender and your circumstances. Some lenders will offer more - 6 times in some cases!

Mortgages for Self-Employed Social Media Professionals

Self-employed individuals in creative industries, such as social media professionals, can also apply for mortgages. These applicants will need to provide the same evidence of income, such as tax returns and accounts, but may face additional scrutiny due to the fluctuating nature of their income. Using a mortgage broker can help find lenders familiar with this type of employment.

Speak to Mortgage One - Your Expert Mortgage Broker

Mortgage One specialises in helping self-employed individuals navigate the mortgage application process. By working with one of our expert brokers, you’ll gain access to lenders who understand self-employment and can offer the best rates for your situation.