Self-Employed Mortgages

Self-employment mortgages can be more complex than someone in full-time employment purely because the way you prove your income is different. 

Lenders want reassurance you can meet the monthly repayments on your mortgage and that lending to you isn’t risky. Being self-employed means your income can fluctuate from month to month, which can make lenders see your income as less secure than employment. Some lenders aren’t set up to deal with the complexities that come with self-employed income and will just turn you down.

But not all lenders. That’s why it’s a great idea to work with a specialist broker who understands the challenges. Someone who does this day in, day out. And knows the right lenders and mortgages suitable for you. Make an enquiry to get matched with a broker who can help you.

If you’re self-employed you might be:

• A Limited company director

• A freelancer

• A contractor

• A sole trader

• In a business partnership

• A gig worker

• An agency worker

Everyone in these categories need to submit a self-assessment tax return to HMRC each year. But the specifics of each person’s situation can be very different. That’s why it’s a great idea to work with a mortgage broker who specialises in self-employed incomes – they’ll have lots of experience dealing with situations like yours.

A lot of mainstream lenders will want to see two or three years’ accounts as proof of your income. Which can make it difficult if you’ve only just gone self-employed and want to get a mortgage. But there’s plenty of specialist lenders who’ll consider your applications without two to three year’s accounts. 

Specialist lenders will still want to see proof of income, but are more likely to accept different types of proof. Some of the lenders we work with will consider you if you have 12 month’s worth of self-employed accounts, or even less. 

A specialist mortgage broker will be able to tell you which lenders are likely to accept you, even if you don’t have three years’ worth of accounts. They’ll also be able to advise you on what documentation you’ll need instead.

Read more in our Self-Employed Mortgage Guide.

That depends upon your trading style. Here’s a few examples:

Sole traders can use net profit (if using accounts) or total income (if using an SA302).

Partnerships can use your share of net profit (if using accounts) or your share of total income (if using an SA302).

Limited company directors can use the director's salary, dividends or (sometimes) retained profits.

Other forms of income that might be accepted by lenders alongside a main source includes investments, rental income, pensions and benefits.

In order to get a mortgage when you’re self-employed, you’ll be expected to meet the lender's criteria. Generally, this means you’ll need to:

• Demonstrate proof of your income over a period of time. Usually, lenders will want to see two or three years’ worth of accounts, but there are lenders who’ll consider applications without, if you’re financially stable.

• Be able to show proof of different income streams.

• Put down a deposit. This shouldn’t necessarily be higher if you’re self-employed. But lenders can sometimes ask for a higher deposit if you’re what they class as ‘risky’, for example, you’ve got a short trading history.

• Meet credit criteria. Any bad credit issues on your credit file (such as CCJs, IVAs, repossessions, bankruptcy or others) can impact your mortgage application and make it more difficult to get approved. A specialist broker can advise you on your options.

• Have the right documentation in place. A lender might ask to speak to your accountant, alongside seeing your proof of income, bank statements and evidence of your deposit.

• Have an accountant. Some lenders will want you to have an accountant they can speak to, but not all.

Read more in our Guide: What Mortgage Lenders Look For in Mortgage Applicants

If you’re self-employed, you’ll need to give your mortgage lender more documents than a full-time employed person would. You’ll need to give them your SA302 form which is  a statement given by HMRC which provides evidence of your earnings. An SA302 form is HMRC’s visual presentation of someone's Income Tax for that year. You’ll be given a SA302 form following the submission of your Self-Assessment tax return.

Paperwork you’ll need for a mortgage:

• Two or more years’ certified accounts

• SA302 forms or a tax year overview (from HMRC) for the past two or three years

• Evidence of upcoming contracts

• Company directors need to provide evidence of dividend payments or retained profits

You’ll also need to give lenders copies of these documents:

• Passport

• Driving licence

• Council tax bill

• Utility bills dated within three months

• Six month’s worth of bank statements

Lenders might also ask for:

• Household bills

• Travel and commuting costs

• Childcare

• Holidays

• Socialising

• Hobbies

• Credit card and store card repayments

• Loan repayments

• Car finance agreements

• Catalogue credit accounts

The amount you can borrow will depend specifically on the lender, and what your income is. 

If you’re self-employed or are in full-time employment through a company, the borrowing criteria is usually the same – it just depends on your income. You can usually borrow a maximum of 4.5 times your annual income. Some lenders will consider less.

If you’re self-employed, the terms of your mortgage will be set by the lender. This is the same if you’re in full-time employment too. The amount you can borrow is usually calculated based on how much you’ve earned over the past few years. But some lenders calculate it based on your previous year of trading only.

Your mortgage will also be calculated differently based on what kind of self-employed person you are. For example: 

• If you’re a sole trader or a partnership, lenders look at your net profits as income.

• If you’re a limited company, lenders will look at your salary and dividends.

Read more in our Self-Employed Mortgage Guide.

If you're self-employed and have bad credit, it can be difficult - but not impossible - to get a mortgage. Because you fall into two special categories, the right lender will be harder to find if you try to do it by yourself.

It's a good idea to get help from a specialist broker, who knows the market and has helped people just like you get accepted for mortgages. They'll also be on hand every step of the way with guidance and advice. They'll know how to make your application look good to lenders.

If you're self-employed with bad credit, there's a few things you can do to help with your application:

• Check your credit report and correct any faults (see how to do it here)

• Pay off as much of your debts as possible before making your application

• If you can, put down more money up front with a bigger deposit

• Pull together your accounts from the last three years

You’ll need to show some kind of proof of your self-employment income to get a mortgage. That’s because lenders need to assess your affordability before making a lending decision. Without any proof, they won’t be able to do that. 

Here’s a few examples of ways you can prove your income to a lender:

• Limited company accounts

• Payslips and / or P60

• Bank statements

• SA302 

• Accountant certificates

Generally, mortgage lenders ask for a deposit of at least 10% of the property value for your mortgage. However, a lot of the mainstream lenders aren't set up to deal with incomes that aren’t from straightforward employment. 

When you’re self-employed, your income is harder to verify - so you might be asked to put down a larger deposit. Having your finances in order will really help you when it comes to putting in your mortgage application.

If you can’t save for a big deposit, you still have options. A specialist mortgage broker can find the right mortgage for you at the best rates, and prepare your application so it looks as good as possible to a lender. So if you're self-employed and thinking about a mortgage, it's best to work with a mortgage advisor who can find the right lender for you. The brokers we work with are experts at finding mortgages for self-employed people, including freelancers and contractors. Make an enquiry to get matched to a broker who can help you.

No, if you’re self-employed, you need to prove your income in the same way an employed person would. 

Before the financial crash in 2008, self-employed people used to be able to prove their income by applying for what’s called a ‘self-certification mortgage’. This meant you could certify your own income, meaning you could take out a mortgage without having to actually prove what you earn.

After the crash, the Financial Conduct Authority (FCA) banned these mortgages as they risked people taking on more debt than they could afford. These days, mortgage regulations are much stricter. Read more in our Guide: Subprime Mortgages Explained.