Mortgages for Self employed

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Being self-employed can have its perks. It often allows for flexibility in working hours and a sense of satisfaction that perhaps is unmatched when employed. How does being self-employed affect you being able to secure a mortgage for your home?

Recent ONS statistics show that 15.1% of the labour force in the UK was self employed in 2017. Statistics also show that there has been an upward trend of self-employed people in recent years, even during market downturns.

Mortgage Lender criteria for self employed borrowers

Given the current economic climate, we are regularly seeing updated criteria for self employed borrowers from mortgage providers. Of course, the criteria can vary from provider to provider, but that’s where we come in and sift through the providers to find one who will accept your personal circumstances. Below is a summary of the many considerations to think about when looking to find a mortgage provider when self-employed:

What documents will the provider need to see?

  • For self employed applicants, mortgage providers will generally require 2 years’ company accounts. There are usually exceptions for companies that have been trading for less than 2 years. 
  • Some providers may also request a copy of SA302s so these documents are good to have on file
  • Your latest business bank statement may also be called upon
  • Tax computations are also sometimes required for sole traders 

What income figure is used from my company accounts to assess my mortgage affordability?

  • Net profit/ net income (income after tax and expenses)
  • Basic income and dividend income for directors of a company owned by more than one person

My income is made up of many sources, will it all be accepted by the provider?

  • Most providers will accept 100% of salary and dividend income when assessing your application
  • Other income such as rental income, maintenance payments, bonus and commission may also be taken into account either fully or at a reduced amount.
  • Therefore it is important to declare all income, as the criteria of what income is considered can vary between providers

My company profits have reduced significantly this year but this is due to COVID-19 restrictions, can I still get a mortgage?

  • Most providers do not look favourably upon declining profits, however this does not mean you cannot borrow from them.
  • For some providers, a declining profit is not considered at all
  • For most providers, this means that an underwriter will look at your application and may ask for additional supporting documentation
Income used by lenders to assess affordability based on your self employed status

Our initial consultation meeting will cover an assessment of your income and circumstances to help establish the process for your mortgage application. We can quickly get an idea of the ever-changing list of likely providers who may be able to help and their requirements upon you.

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For more information on Mortgages and advice for Self–employed clients:

* Source for Labour Market statistics for those self-employed in the UK: https://www.ons.gov.uk/ employmentandlabourmarket