Getting a mortgage when self employed is possible, but the process can feel more complicated than it is for someone in regular employment. Many lenders ask for more evidence of income, and the way they assess affordability can be different if you are a sole trader, company director or contractor.
At Key Mortgage Advice, we regularly help self employed clients secure mortgages for first time purchases, home moves, remortgages and buy to let investments. With the right preparation and the right lender, being self employed does not mean you cannot get a mortgage.
Can You Get A Mortgage When Self Employed?
Yes, self employed applicants can get a mortgage, but lenders need to see reliable evidence of income before they agree to lend.
When you are employed on PAYE, your income is usually shown through payslips and a contract. When you are self employed, income may come from business profits, dividends, contracts or a combination of sources. As a result of this, lenders need more information to confirm what you earn and whether the income is stable.
Most lenders will look at your earnings over the last one to three years and use this to calculate how much you can borrow. The exact approach varies depending on the lender and your circumstances.
How Lenders View Different Types Of Self Employment
Self employment can be structured in different ways, and lenders assess each type slightly differently:
- Sole traders are usually assessed using business accounts or SA302 tax calculations to show profit.
- Limited company directors are often assessed using salary and dividends, although some lenders will also look at retained profit depending on the case.
- Contractors may be assessed using contract income, day rate calculations or accounts, depending on the length and stability of the work.
As each lender has different criteria, choosing the right one can make a big difference to the outcome.
What Documents Are Needed For A Self Employed Mortgage?
Lenders normally ask for more paperwork when an applicant is self employed. This helps them confirm income and check that the business is stable.
Common documents include SA302 tax calculations, tax year overviews from HMRC, business accounts prepared by an accountant, recent bank statements and proof of identification.
Some lenders may also ask for evidence that the business is still trading, such as recent invoices or contracts. Preparing these documents early can make the application process much smoother.
How Affordability Is Calculated For Self Employed Applicants
Affordability checks are used to make sure the mortgage is realistic for your income and spending. For employed applicants, lenders often use salary figures. For self employed applicants, they usually look at average profit or average income over a number of years.
If income has increased recently, some lenders may use the latest year, while others will use an average. This is one of the reasons why advice can be useful, as different lenders may offer different borrowing amounts.
Affordability checks also look at credit commitments, household spending and the size of the deposit.
You can use our mortgage calculator to get an estimate, but a full review gives a more accurate figure.
Can You Get A Mortgage With Only One Year Of Self Employment?
Some lenders prefer at least two years of accounts, but there are cases where one year may be accepted. If you have a strong deposit, a good credit history or previous experience in the same line of work, certain lenders may consider an application with one year of trading.
This is not guaranteed, and the options can be more limited, but it is still possible in the right circumstances. Speaking to a mortgage advisor in Preston, Southport or Garstang early can help you understand which lenders are more open to this type of application. To speak to our team, you can call us on 01772 620000.
Joint Applications With Self Employed Income
Many mortgages involve two applicants, and one or both may be self employed. In joint applications, lenders look at the income of both people, along with their credit history and commitments.
If one person has employed income and the other is self-employed, the lender will assess each income separately before combining them. This can sometimes make the application easier, but the same rules still apply for proving self employed income.
How To Improve Your Chances Of Getting Approved
There are several steps that can help make a self employed mortgage application stronger:
- Keeping accounts up to date makes it easier to show income clearly. Making sure tax returns are filed on time also helps, as lenders often ask for recent figures.
- A good credit history can improve the choice of lenders available. Avoiding missed payments and keeping borrowing under control can make a difference.
- Saving a larger deposit can help, as it reduces the risk for the lender and may open up more mortgage options.
- If income changes from year to year, it can be useful to speak to an advisor before applying so the right lender is chosen.
How A Mortgage Advisor Helps Self Employed Applicants
Self employed applications often involve more checks, more documents and more variation between lenders.
A mortgage advisor helps by matching your situation with lenders whose criteria are more suitable. Instead of applying to one bank and hoping the income fits, an advisor can compare different options across the market.
Here at Key Mortgage Advice, we review your accounts, income structure and deposit before recommending lenders. This helps avoid unnecessary delays and reduces the risk of declined applications.
We also manage the process from start to finish, including preparing the application, dealing with the lender and explaining each stage. This can be useful whether you need a first time buyer mortgage, a remortgage, a buy to let mortgage, a commercial mortgage or a lifetime mortgage.
Getting Ready To Apply
If you are self-employed and thinking about applying for a mortgage, the best step is to prepare early. Make sure accounts and tax returns are up to date, check your credit report, and have a clear idea of how much deposit you can use.
Arranging an agreement in principle before viewing properties can also help, as it shows sellers that you have already been assessed by a lender. If you are unsure where to start, speaking to an advisor can make the process clearer.
Speak To Key Mortgage Advice
At Key Mortgage Advice, we help self-employed clients across a wide range of situations, from first time buyers to experienced landlords and business owners. We compare mortgages across many lenders, so we can look at options that suit your income structure rather than relying on one provider.
If you would like to discuss getting a mortgage when self-employed, you can call us on 01772 620000, email us at enquiries@keymortgageadvice.co.uk, or fill in our online contact form to arrange a free consultation.
