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Self-Employed Mortgage (Part 1)
Peter Matthews explains how the mortgage process works if you are self-employed.
Is it hard to get a mortgage if you are self-employed?
Not if you use the right advice process. If you’re trying to do this yourself, there are a lot of things to take into consideration, especially in how you present your income to a lender.
A good advisor will sort these things out for you because we recognise how income is taken into account in different ways for the self-employed. It’s not as easy as looking at wage slips, bonus statements and P60s. It’s a lot more intricate.
What type of mortgage can I get if I’m self-employed? Can I get a 95% mortgage if I’m self-employed?
Any mortgage that is available for an employed person, a self-employed person can get.
It’s all about proving the income, rather than where that comes from. There’s no problem in obtaining a 95% or even a 100% mortgage if it’s on shared ownership.
How many years do you have to be self-employed to get a mortgage? Can I get a mortgage with only one year of self-employment?
Lots of lenders will ask for three years, some two, but being self-employed for only one year wouldn’t stop you getting a mortgage. There are lenders that will consider this.
Some lenders that take the last two years will work out your average year, while if your income is increasing, other lenders will just take the most recent year. That’s why it’s always best to have that advice, to lead you to the right lender for your own circumstances.
My most recent years earnings were less than my average. Will this affect my mortgage application?
Where there’s a declining profit or declining income, most lenders will use the most recent year when applying their income multiples. If there were extenuating circumstances, such as a large capital outlay for a one-off reason, some lenders will take this into consideration.
There are many lenders offering many different approaches for the self-employed. It’s all about finding the right lender for your circumstances.
How much can you borrow as a self-employed person? How many times my salary can I borrow for a mortgage if I’m self-employed?
The same income multiples apply whether you’re employed or self-employed. Lenders may offer 4.5 times income, five, 5.5, and even up to six times income, based on affordability.
Newer lenders to the market are offering 40-year terms on mortgages and allow higher income multiples on these. Again, we select the right lender for each individual circumstance – but 4.5 times is typical, while up to six times is potentially achievable.
What mortgage deposit do I need if I’m self-employed?
It’s the same for the employed and self-employed. You can get a mortgage with a 5% deposit. One lender at the moment will accept a £5,000 deposit on up to a £500,000 purchase – so that’s a 99% mortgage.
If you’re purchasing via shared ownership, it can even be up to 100% [correct at the time of recording in March 2025].
What are self-certification mortgages and do they still exist?
Self-certification mortgages were available up until around 2008. You could put your income on a form and the lender would do no checks on it. You were certifying that you earned that amount. These mortgages are no longer in existence.
How will I be assessed as a self-employed mortgage applicant?
It’s very much the same as an employed person. Your credit file is assessed, along with how long you’ve been in your occupation. If you’ve gone from an employed position to self-employed in the same role, that will be taken into account as well. In that case, you often wouldn’t need the longevity of self-employment.
Perhaps you were employed in the IT sector and have now gone self-employed as a contractor. That can be acceptable and the assessment is exactly the same as any other form of income.
Will IR35 affect my mortgage application?
Realistically, no. The only effect IR35 could have is if HMRC deem that you shouldn’t be self-employed because your income is only derived from one source. You would therefore need to be employed, earning the same income.
Speak To an Expert
Our job is to provide you with the expertise and knowledge to find you the most appropriate solution. Whether you’re investing in property or looking to buy your first home, our mortgage advisers can help.
How will a lender calculate my self-employed mortgage earnings?
If you’re self-employed as a sole trader, they will base the income multiplications on your net profit. Certain lenders will add back in depreciation and other offsets for tax.
How do I prove my income? What documents do I need to apply for a mortgage if I’m self-employed?
Typically, you will need at least two years’ tax calculations and tax year overviews. The tax calculations form part of your tax return. They can be downloaded separately from the government portal as a single document, rather than the whole tax return. Some lenders will ask for your accounts, as well.
Typically they will assess you on what used to be called an SA302. Now these are separate documents – the tax calculation and tax year overview
You’ve demonstrated how a mortgage broker can help, have you got anything else to add?
There are different avenues of self-employment. You could be a sole trader, a partnership, or a limited company director – and they’re all assessed differently.
We’ll cover how a limited company director’s income is assessed in a different episode. But at the end of the day, a mortgage advisor will look at how you’re employed, how your income is derived, and find the most appropriate lender for you.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
Why Choose Fort Advice Bureau LTD?
- Our experienced Management Team has over 50 year's worth of combined knowledge in the mortgage industry.
- We can quickly assess your needs and compare the most suitable products to find you the most suitable deal.
- With an honest, transparent and consultative approach, we are 100 per cent focused on delivering a first-class service every step of the way.
- We build strong, long-lasting relationships with lenders and are not reliant on a computer-generated response.
Fort Advice Bureau is a directly authorised, independent, Mortgage and Protection brokerage which is simply the best way to operate. We are looking for experienced mortgage and protection advisers across the UK, to become part of our business. You will already be self-employed or looking to become such, no monthly fees, and a competitive flexible package. We are an easy-going and friendly firm which you can confirm by asking any one of our advisers.
Telephone: 01245 203495
Email: FAB@fort-ab.co.uk
