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Self-employed mortgages explained

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.

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Apply for a self-employed mortgage with L&C

Work for yourself and worry about getting a mortgage? Getting a self-employed mortgage doesn’t have to be difficult with our help. Here at L&C, we’ve got all the specialist knowledge you need to ensure you get the best self-employed mortgage.

Our expert advisers are on hand to talk you through all the available options, and to support you through the application process. Our service won’t cost you a penny, so get in touch with us now to find the right mortgage for you.

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Frequently asked questions

What will I need to provide for a self-employed mortgage?

Lenders will want to see proof of your identity and your current address, along with paperwork confirming your earnings, such as your certified accounts or self-assessment forms (SA302s). They’ll also want to see bank statements showing your income and outgoings. Lenders will also perform a credit check to ensure that you have a good credit rating and no previous issues with borrowing.

How do you prove income for a mortgage when self-employed?

Lenders will usually ask for your SA302 forms for the last two or three years as proof of your income. This is the self-assessment form that shows how much income was declared to HMRC and how much tax you paid. Many lenders will also want to see accounts that have been prepared by a qualified accountant.

Do self-employed people have to pay higher mortgage rates?

No, self-employed people pay the same mortgage rates as those who are in full or part-time employment.

How does a company director get a mortgage?

If you're the director of a limited company, potential lenders will assess your affordability for a mortgage based on the salary you take along with your dividends. Any profit retained within the business is usually not considered as part of your affordability assessment, although some lenders may include this. If you've been retaining money in the business, you may wish to reconsider your payment structure in the run-up to taking on a mortgage. You can find out more about getting a mortgage as a company director in our guide.

How many years do you have to be self-employed to get a mortgage?

Most lenders ask for at least two years of financial records - although some may request accounts spanning three years. If you're newly self-employed and only have records for one year, there will be fewer lenders willing to offer you a mortgage, but all is not lost. Get in touch with L&C and we'll scour the market, including mortgage providers that may not be available on the open market, to find the best deal for your personal circumstances.

How much deposit do I need for a self-employed mortgage?

As with other types of mortgages, you're more likely to get a better rate if you've saved up a bigger deposit. Typically the best deals are available with a 40% deposit, and although you may be able to get a mortgage with a smaller deposit, it's unlikely to be at such a favourable rate. L&C can help you find the lenders most likely to lend to you as a self-employed person, whatever the size of your deposit.