Mortgages for the Self Employed is often a hugely debated issue, we share our tips on how to give your mortgage application the best possible chance of success.
High Street Lenders tend not to offer mortgages to the self-employed, contractors and freelancers without considerable paperwork and delay, so finding the right mortgage lender for your circumstances can be daunting. But as a whole of market mortgage advisor, we have access to all lenders available and understand the specifics that each mortgage lender has when it comes to get a mortgage as a self employed business owner.
There are around 4.8 million self- employed people in the UK, many of whom mistakenly think their irregular income or lack of three years’ worth of accounts means they automatically don’t meet the requirements for a mortgage. But this is not the case. If you’ve been put off from applying, it might be time to reconsider.
MORTGAGES FOR SELF-EMPLOYED BUYERS
Self-employed buyers (including sole traders, contractors, partners and directors of limited companies) have access to the same range of mortgages that any other buyer has.
If your finances are in good order and you can prove you have a regular income, self-employment is unlikely to cause your application to be rejected. You’ll simply need to provide different documentation, and perhaps more evidence of your income, than a buyer who’s in regular employment.
PROVING YOUR INCOME AS A SELF-EMPLOYED BUYER
Mortgage providers will ask you for evidence of your income for the last two to three years, as they would ask any other applicant. How you do this depends on how you are currently self-employed.
- Sole traders (self-employed individuals) will be assessed based on their income tax self-assessments.
- Partners (people who are in business with others) will be assessed based on their share of the profits of the business.
- Directors (people who have formed limited companies) will be assessed based on their salary and dividends paid out by the company.
DOCUMENTATION FOR YOUR MORTGAGE APPLICATION
You’ll need to supply the same documentation as anyone else as part of your application (e.g. proof of identity and address), as well as some additional documents. Exactly what you’ll need to supply depends on your mortgage provider and your self-employment status, but you might be asked for any of the following:
- SA302 forms: these are provided by HM Revenue & Customs and show your earnings in previous years based on your income tax self-assessment.
- Payslips and P60s: if you pay yourself a salary through your limited company, or are employed through an umbrella company, you’ll be asked for these as evidence.
- Limited company accounts: directors will usually be asked to show their limited company accounts for the last two years.
- Contracts: you might be asked to show documents proving your ongoing working relationship with clients and the agreed rates of pay.
- Bank statements: if you have a separate business bank account, be prepared to show historic statements for this, as well as your personal account.
IMPROVING YOUR CHANCES OF MORTGAGE APPROVAL
While there’s no reason to be pessimistic about your chances of mortgage approval, you should also know that mortgage refusals can temporarily affect your credit score and therefore make your next application slightly more difficult.
You’ll give yourself the best chance possible of first-time approval if you do the following things:
- REGISTER TO VOTE – Make sure that you’re on the electoral roll, as mortgage providers will use this to check your identity. You’re likely to be rejected if you’re not registered.
- CHECK YOUR CREDIT HISTORY – Being self-employed makes it even more important to show that you’re good at managing your money, so you need to be aware of anything in your history that indicates otherwise. We recommend you use Check My File to learn your credit rating.
- PAY YOUR BILLS – Make sure all your accounts are up to date, with no overdue bills or repayments. Your credit card doesn’t need to be fully paid off but check that you’re not close to your credit limit.
- AVOID PAYDAY LOANS – There are certain types of credit, including payday loans, that look bad to mortgage providers. If a recent payday loan will show up in your credit check, you might choose to wait for a while before making your mortgage application.
- PREPARE YOUR DEPOSIT – Generally speaking, mortgage providers prefer borrowers with larger deposits. Waiting until you have substantial savings will help your application. If family members are contributing to your deposit, make sure the money is ready to go before you apply.
EXPERT SELF-EMPLOYED BORROWING ADVICE
Obtaining a mortgage if you are self- employed, a contractor or a freelance is often less straightforward than for those people in full-time employment. So it pays to seek advice from an independent mortgage broker with expertise in self-employed borrowing. With different lending criteria, rates and charges imposed on the self- employed by the various mortgage lenders, we’ll help you negotiate the right deal for your situation. As a whole of market mortgage broker who doesn’t charge a broker fee we are here to help you find the most suitable mortgage.
At Yes Mortgage Services, we offer a comprehensive range of products from across the market.
Irrespective of whether you are looking to buy a new home, re-mortgage an existing property, or looking to protect your family from the unpredictability that life throws at it or protect your income if you are unable to work due to accident or ill health.
Yes Mortgage Services are committed to offering you the highest possible standards of service. We can undertake the whole process from answering the initial questions through to handling multiple product applications. Ensuring that everyone gets treated with the same urgency and maintaining your best interests are our main goals irrespective of the value of the mortgage.
We recognise that both we and our customers have everything to gain if we look after your best interests and treat you fairly in all aspect of our dealings with you.