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Self employed mortgage

There are many advantages to being your own boss and running your own business, however it can raise some additional challenges with getting a mortgage.

It is still usually fairly simple to get a self employed mortgage and you should still have a good range of options available to you. You will just need to consider some extra requirements and potentially some additional issues that can come up.

The main difference between a mortgage for someone that is employed and an employed mortgage is proof of income or earnings.

If you need EXPERT mortgage advice then you can contact our team on 0330 118 8188 or CLICK HERE.

Self employed stats UK

If you look at the number of people that are classed as self employed in the UK, the figures might be quite surprising:

  • Percentage of people classed as self employed: 13.7% (2021)
  • Number of self employed workers: 4.56 million
  • Average self employed income: £42,631 per year (£21.86 per hour)
  • Number of freelancer workers: 2.2 million (2021)
  • Number of small businesses (SME’s): 5.6 million

As you can clearly see from these figures, the UK self employment market is a considerable size and therefore mortgage lenders need to support this.

Can self employed get a mortgage?

The simple answer is yes you can certainly get a mortgage if you are self employed and your mortgage rates should be the same or similar to employed people.

There are a number of other questions to ask yourself when you apply for a self employed mortgage, such as:

  • How long have you been self employed for (longer than 12 months)?
  • Can you provide proof of income?
  • Do you have an accountant?
  • Are your accounts up to date?
  • How do you receive your income (e.g. salary, dividends, or other income)?
  • Have you got multiple businesses?
  • Do you have enough readily available funds?
  • Is my business trading and profitable?

You’ll need to provide evidence that you are a good risk when it comes to borrowing from a mortgage lender. Also consider that each lender will have their own criteria when it comes to mortgage lending so you might need to speak to a self employed mortgage specialist.

How to get a mortgage when self employed?

There are still plenty of options available to you when applying for a self employed mortgage and you should consider which is best for you.

Some of the main options for applying for a self employed mortgage are:

  • Mortgage advisor or broker – you can apply for a self employed mortgage through a normal mortgage broker or a specialist mortgage advisor or broker for self employed. The main advantages here are that you will have someone with experience and expertise to guide you through the application process and help to gather evidence of income
  • Apply online for a mortgage – it is also still possible to apply for a self employed mortgage online via one of the digital brokers or banks. This can be useful and more convenient, especially to people who are busy during working hours. Unfortunately it can also be more difficult going down this route because you’ll have to do all of the work yourself and there is a higher chance for being declined
  • Bank or building society – another option is to speak directly to your own bank or building society as well as just apply to another bank. This might be a good option for people with an especially good relationship with their personal or business bank. You should also be aware that you choices and options will be limited because you are only dealing with one lender

Best mortgages for self employed

Getting the best mortgage rates and mortgage deals if you’re self employed can seem quite difficult or confusing.

There are lots of options that are usually available to you depending on your self employed status and your credit history. It is considered to be slightly more complicated to get a self employed mortgage than an employed mortgage, so you need to do your research.

You can also improve your chances of getting a better rate simply by following some simple steps.

  • Have your accounts up to date and ready – you’ll have a much easier job applying for a self employed mortgage with up to date and good accounts
  • Improve your credit score – it’s usually the case that people with a higher credit score or better credit rating will get lower rates and find it easier to get a mortgage. This is especially the case for people who are self employed
  • Self employed mortgage lenders – some lenders are clearly better than others for people who are self employed and therefore it’s best to approach these first
  • Look for the best deals and fees – mortgages is a very competitive market and therefore some deals can be far better than others. Make sure that you check which deals are best or speak to a broker with access to multiple lenders and deals

You can reduce your mortgage rate and monthly mortgage payment significantly by being smart about getting your self employed mortgage. Make sure that you do your research and speak to an expert to get the best deals.

Self employed mortgage advisor

We are an expert in helping people who are self employed and with complex incomes to get mortgages at lower rates with less hassle.

Some mortgage advisors or brokers will not have the relevant experience and expertise to be able to help you. You should definitely check to make sure that your chosen mortgage advisor has the relevant background to give you the best outcomes.

There are literally thousands of mortgage advisors and brokers out there to help to get your mortgage sorted.

Some potential problems speaking to the wrong mortgage advisor or broker:

  • Could take a lot longer to arrange your mortgage
  • You might end up paying a higher rate
  • Lending may be restricted (lower loan to value)
  • Higher chance of being declined

You should always check to make sure that your self employed mortgage advisor has the relevant knowledge or expertise, so don’t be afraid to ask the question.

How many years do you need to be self employed for a mortgage?

It’s true to say that most lenders will require a minimum trading period for you to be eligible to apply for a mortgage.

The amount of time that required for you to be trading will vary depending on which lender you are speaking with. Some lenders will require a minimum of 1 years trading, while others may require 2 years or more full accounts.

Businesses that have a good trading history over a reasonable length of time will naturally be considered to be a lower risk than new businesses.

Some lenders may offer mortgages at higher rates for people with less than 2 years of trading history. You should also be aware that your income and profits may be taken over 2 or 3 years for some lenders and then calculate an average.

There are also different requirements for different types of self employment and types of companies (e.g. Limited Company, Partnerships, Sole Traders, etc.).

Mortgages for self employed with 1 years accounts

It’s fairly common for people with a new business to want to get a mortgage shortly after starting the company.

We are often asked whether it’s possible to get a mortgage for someone self employed with 1 years accounts. The quick answer is, yes you can and there are more options available for this type of mortgage than there has been in previous years.

Some of the types of businesses that can get self employed with mortgages with 1 years accounts:

  • Limited companies with 1 year of accounts
  • Sole traders who have been self employed for 12 months
  • Buy to let mortgages with 1 years self employed accounts
  • Contractors and freelance workers for 1 year
  • Self employed for 12 months with bad credit
  • Business investment remortgages

It is also highly likely that you will need to apply for this type of mortgage through a specialist broker and lender. It is unlikely that a mainstream or high street lender will offer a mortgage to someone with only 1 years accounts.

What are self employed mortgage requirements

When you apply for a self employed mortgage there are standard requirements and some potential additional requirements from most lenders.

Most of the most common self employed mortgage requirements are:

  • 2 or 3 years accounts
  • Projections for coming year
  • SA302 forms or tax-year overview
  • Profits and dividend evidence
  • 3 months bank statements
  • Accountants reference

The level of detail that is required and the amount of evidence will depend on your credit history, loan to value and trading periods. You might find that there are less requirements for evidence for a more established business than a newer or higher risk business.

For our guide on evidencing self employed income with an SA302 CLICK HERE.

Can I get self employed buy to let mortgages

Another common mortgage type is buy to let for self employed which is a fairly standard situation.

You can absolutely get a buy to let mortgage if you are self employed and the application process is often simple. There are usually less proof of income requirements for buy to let mortgages, which is the same for self employed.

One of the main points for a buy to let mortgage is evidence that the property is a viable investment. This means that the most common issue is making sure that the property rental or potential rental income is sufficient to pay the monthly mortgage payments.

There are standard mortgage requirements for a property rental yield to mortgage payment ratio (usually 125% of the monthly mortgage payment based on interest only payment).

You should also be aware that you will usually require a minimum deposit or equity of 25% to be able to get a buy to let mortgage.

There will often be no income requirements for a buy to let mortgage so it won’t make any difference if you are self employed or employed. Some lenders may ask for some proof of income depending on their criteria and requirements.

For more information on buy to let mortgages CLICK HERE.

Self employed how much can I borrow?

You will find that every lender is different when it comes to assessing income for mortgages and this is especially true for self employed.

Some lenders will be quite flexible and adopt an individual assessment approach to mortgage underwriting. Other lenders can be quite rigid when assessing income and affordability for self employed.

Income can be quite complex for people who are self employed so you might have a mix of several elements.

The most common income multiple for mortgages for self employed is 4.5 your annual income (same as employed mortgages).

There are several different types of self employment to consider, including:

  • Sole traders
  • Partnerships
  • Company Directors
  • Contractor
  • CIS worker

Lender criteria will differ for each of these so it’s often best to speak to a mortgage specialist with the right knowledge and expertise in this area.

Can I get a newly self employed mortgage?

It is true to say that the longer you have been either self employed or trading as a company, the easier it will be to get a mortgage.

There are lenders that will consider lending to people with one years trading and accounts but these will be limited. You might find that the rates that you are offered will be higher than for those with a more established business.

The standard requirements for self employed mortgages is 2 or 3 years accounts and trading history. Lenders will often take an average of the past 3 years salary and income to calculate your borrowing capacity.

Mortgages for self employed without accounts

There are some situations where you might be self employed but might not have full accounts to evidence your income.

It is certainly going to be more difficult to get a mortgage for self employed people without any accounts, but it is possible. There are some specialist lenders that will consider these types of applications in certain circumstances.

With this it will certainly be best to speak to a self employed mortgage specialist like us to get the best deals.

Can I get a self employed mortgage with bad credit?

You will find that similar rules apply for bad credit mortgages whether you are self employed or employed.

There may be different reasons for having bad credit because of the fact that you run your own business. It can be difficult to run your own business and manage your finances effectively.

There are many reasons why you might have bad credit and it may be a temporary issue where business levels are lower.

You should speak to an expert like us to get the very best deals and make sure that you get accepted for you mortgage.

For more information about accessing a mortgage with poor credit CLICK HERE.

Useful resources – Self employment: detailed information – Working for yourself

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