Self-Employed

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Is it harder to get a mortgage if you are Self-Employed?

It’s not necessarily more difficult for Self-Employed applicants to get a mortgage. There are various different types of criteria that need to be met with any mortgage application, with income being a big part of that. If you’re Self-Employed or employed, there can be unique challenges, but lenders have got a lot better at helping Self-Employed clients, and will now look at Self-Employed income differently.

Some lenders look at net profits of your business along with your salary. Some look at your dividends and there’s lots of different ways that we can help that. But as experienced, brokers were able to navigate each of the different lender’s criteria and find which lender is the most suitable.

Does being Self-Employed affect the mortgage application 

There are a few common issues facing Self-Employed clients in particular, how long they’ve actually been Self-Employed, the amount of deposit or equity that they might have within their current properties, whether they’ve got a huge increase in profits or if that’s declining. More recently, we’re seeing since the pandemic, lenders are looking at if they’ve used any bounce back loans or how their businesses have been affected by it.

What are the differences between being employed and Self-Employed?

If you’re Self-Employed, you usually need to show at least two or three years worth of accounts. IIf you’re employed you typically just need to show three months of payslips. Sometimes you can even get a mortgage just with a copy of a contract if you’re employed. So there’s quite a big difference in the terms of what lenders want to see.

If I only have one year’s accounts, can I still get a mortgage? 

A Lot of lenders will look at just one year, but you generally tend to find that substantially more lenders become available once you’ve got two or three years of tax returns.

Are Self-cert mortgages still available? 

They’re not been available since the financial crisis in 2008 and are very unlikely to return. 

Can you get a joint mortgage if one is Self-Employed?

Yes, absolutely. Each  individual applicant’s incomes are looked at in their own way. So if you’re employed and you’re looking to do a joint application with someone who’s Self-Employed, they’ll look at each individual applicant separately and then together. 

It’s even possible to have a joint application if the second applicant isn’t employed at all. 

Is Buy to Let available for the Self-Employed? 

As Self-Employed clients, Buy to Let mortgages are sometimes easier than applying for residential mortgages, as the client’s income is not necessarily the key to a successful mortgage application, it’s more focussed on the rental income that the property will generate.

What is the difference between someone who is Self-Employed and a Limited Company Director?

Mortgage lenders assess income differently and require different documentation depending on whether you’re a Sole Trader than if you’re a Limited Company Director. As a sole trader, you typically need to provide two to four years of your personal tax calculations, which will show your profits.

When you’re a Limited Company Director, there are a couple of different ways that they can look at your income. If you own more than 25% of the business, you can use your dividends and your salary. Sometimes instead of the dividends, you can use the net profit for the business, which can be a lot higher.

How much can a Self-Employed person borrow? 

Usually if a person earned £100,000 as an employed person or £100,000 as a Self-Employed person, there’s not typically a difference between what they can borrow. 

There can be some lenders who have criteria that their maximum lending cap is a lower multiple for Self-employed people than if they’re employed. Brokers like ourselves, however, can navigate which lenders are going to be the best for you.

What documents do you need when applying for a Self-Employed mortgage?

SA032s, which shows the overall tax calculation for the particular tax year, typically two or more is best. Alongside this, tax year overviews and business bank accounts may also be requested.

Also required areID documents and bank statements and other standard documentation that all applicants would need to provide.

How does Remortgaging work for the Self-Employed? 

Typically it works the same way whether you are employed or Self-Employed. You would need the same sort of documentation as we’ve sort of already discussed. The only key difference is that you don’t have to go through the legal work required to get a new property. It could also be a much quicker process to get a remortgage onto a better interest rate or borrow some more money.

How can Assured help with your Self-Employed mortgage application?

It’s not necessarily harder to get a mortgage if you’re Self-Employed, but it is something that you might want to talk to an adviser about. We have access to many different lenders and can find different sets of criteria to match your circumstances, meaning you’re more likely to be approved for your mortgage.

There are thousands of different mortgage products, each particular product will have their own set of criteria. We’re here to help to make sure that you’re getting the best deal for your particular circumstances. 

From the Assured FFG website, navigate to the contact page and get in touch with a member of the team. There’s also access on our social media pages.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.