Getting a mortgage if you’re self-employed
The number of self-employed people in the UK continues to grow, but getting a mortgage if you work for yourself isn’t always straightforward.
There were 3.3m self-employed people in the UK in 2001, according to latest data from the Office for National Statistics, but by last year, this number had risen to 4.8m, equivalent to around 15% of the working population.
Whilst the self-employed have access to the same mortgage rates as everyone else, when applying for a mortgage, lenders will want to see proof that they have a consistent regular income. This isn’t always easy if, for example, you’re working as a freelancer or contractor and your income tends to vary from month to month, or if you’ve only recently become self-employed.
Prior to the introduction of the Mortgage Market Review (MMR) in 2014, self-employed people could get a self-certification mortgage, which involved telling a lender how much they earned without having to provide any evidence. However, these are no longer available and now all lenders must see proof of income for all applications.
What proof of income do you need to provide?
You will typically be asked to provide a track record of the last 2 to 3 years, in order to demonstrate your income level. Don’t despair if you don’t already have two or three years of records, as some lenders will consider applications from borrowers with only one year’s proof of earnings.
Lenders might ask for accounts to show your track record, but will now usually accept self assessment tax calculations (SA302’s) and a tax overview, which can be printed from the HMRC website. Alternatively a lender might ask your accountant to complete a certificate certifying your income.
Are you up to date?
When supplying the required paperwork, bear in mind that many lenders specify that the most recent year-end documentation must not be older than 18 months before the date of application.
We’ve therefore just passed the point when figures for 2016/17 will no longer be acceptable as the latest year’s figures, so it’s important to ensure your paperwork is up to date if you are planning to make a mortgage application.
What other information is required?
As well as providing evidence of your income, you will need to submit other supporting documents with your mortgage application, including details of outgoings such as childcare costs and utility bills.
Lenders will also want to see proof of who you are and where you live, so you are likely to be asked to produce both photo ID such as passport or driving license, and recent utility or council tax bills showing your address.
Is your self-employed paperwork up to date?