How to get a Self Employed mortgage
In this article we’ll explain some key considerations around getting a mortgage if you are self-employed, and offer some top tips to help you prepare.
As of 2019 around 15% of all UK workers were self-employed, and this number is on an upwards trend thanks to redundancies related to the pandemic.
When using the term “Self Employed” for mortgage purposes, we’re talking about Contractors, Sole Traders, a Partner of a Partnership or a Director of a Limited Company with a significant shareholding (usually more than 20%). With each type of self-employment, mortgage lenders may ask for different documents to support an application.
What are the most common documents you’ll need to supply for a Self Employed mortgage?
- Last two or three years tax calculations, also known as SA302’S
- Last two or three years tax year overviews
- Copy of your current & past contracts if you are a contractor
- Two or more years full certified company accounts if you are a Limited Company Director.*
- Last three months Business Bank Statements
*Most lenders insist company accounts are prepared by a qualified accountant.
Can you get a mortgage with just 1 years’ accounts / figures?
If you only have accounts or a tax return for one year you may find it a challenge to obtain a mortgage, but it may not be impossible. Lenders will ask additional questions around your employment history, for example: Have you been in the same job role/industry previously and for how long?
You may also find that a larger deposit could be needed.
What should someone who is Self Employed do to prepare for a mortgage application?
If you’re hoping to buy or remortgage in the near future it’s always best to plan ahead. Most mortgage lenders will lend up to 4–5 times your declared income (subject to affordability), so bearing this in mind you might want to set yourself a target of how much you need to earn in the coming months & years..
If you take cash payments through your work this can be included in your figures but you must declare it. Read our recent article for more information.
Top 5 tips for Self Employed before applying for a mortgage:
- Check your credit file and make sure there are no mistakes. Most lenders will use Experian or Equifax when doing a credit check on an application. You might want to sign up to a free credit-monitoring service such as MSE Credit Club
- Register to vote – this is a big credit booster. – https://www.gov.uk/register-to-vote
- Save as much as you can for deposit and fees.
- Avoid taking out pay day loans and buy now pay later agreements.
- Speak with an independent mortgage adviser to make a plan
Here at Mortgage Medics we’ve been helping self employed individuals get mortgages for over 15 years, so if this has got you thinking about moving, remortgaging, or your finances generally, we’d love to hear from you. Get in touch and we’ll be help you understand what’s possible, or sign up to our monthly newsletter, to keep your finger on the pulse.
William Sproule – 29th July 2022
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