Self Employed Mortgages

Ideally three but as long as you have at least one years’ accounts or one years’ SA302, we can look at obtaining a mortgage for you.

Hear from our very own Martyn Barberry discuss all things Self Employed Mortgages.

Self Employed – A guide of what you need to know

If you’re self employed and trying to obtain a mortgage, it can seem a daunting process trying to prove your affordability and you may assume lenders will not view you as an ‘ideal’ applicant. However, self employment has grown exponentially in the past few years; with more and more people deciding to go solo, self employed mortgages are becoming increasingly common in the mortgage world.

Is it worth applying for a self employed mortgage with only one years’ worth of accounts?

Traditionally, mortgage lenders would have liked to see at least three years’ worth of business accounts, however, this has changed since the market has progressed. As long as you have at least one years’ accounts or one years’ SA302, we can look at obtaining a mortgage for you.

Buy-to-let mortgages for self employed people

When it comes to buy-to-let mortgages for the self employed, a lender will show most attention when it comes to assessing your affordability to the rental income the property is going to yield and whether this is comfortably going to be able to cover your mortgage payments. In addition, some lenders do like you to have a minimum personal income of £15k on top of this, whether you’re self employed or not.

Joint mortgages

If you are buying a mortgage within a couple, where one person is self employed and the other isn’t, you are still able to secure a mortgage. As a broker, we would look at the employed persons’ proof of income through payslips and P60’s and the self employed income would be assessed based on one years’ SA302 or one years’ worth of accounts.

What other documents will you need for your mortgage application?

Other than your proof of income, there will be other documents that you will need to supply a lender throughout the mortgage process:
  • Proof of identity
  • Proof of address
  • Last three months bank statements
  • In the event of COVID-19, some lenders are also asking for business bank accounts as well as personal bank accounts so they can ensure your income hasn’t been adversely affected during the virus outbreak.

Self employed vs limited company director

There are a few differences to note between self employed individuals and limited company directors when it comes to your mortgage application, but these differences generally depend on the amount of shares you have in the company. If you’re an employed company director with less than 20% shares in the company, a lender would generally look at your payslips and P60 documentation to assess your affordability. If you own more than 20% of the company, you are seen as self employed in the eyes of a lender as you can essentially determine your own income. In this case, a lender may want to see your business accounts to assess the company profits alongside personal income documentation. If you are self employed, a lender will assess your income by looking at your net profit, but if you are a company director, they will look at your PAYE income and any dividends you have been paid out of the company’s profits.

How much can you borrow on a self employed mortgage?

The amount you can borrow will differ between lenders. Before the 2008 recession, lenders used a simple calculation to determine how much you can borrow – which was around 4x or 5x your income. In 2013, a government mortgage review encouraging lenders to act more responsibly meant lenders now undertake full affordability checks, no matter what your employment status is. This income and affordability check will then determine how much you are able to borrow.

Accountants

Throughout the mortgage process, dealing with accountants is usually a necessity in order to generate the documentation you need to prove your affordability. We can work with your accountant directly once you have granted permission for them to pass on the accounts, or, you may already have your accounts from your accountant when they have been previously supplied for end of year sign off – if this is the case, you can upload them to our secure client portal in a matter of minutes.

Get in touch

We are passionate about self employed mortgages because we have been there ourselves and we know how daunting the idea of a self employed mortgage can be, which is why we love being able to help guide you through your journey of owning your dream home; whether you’re self employed or not.