Joint Mortgage When One Applicant is Self-Employed
Can you get a joint mortgage if one applicant is Self-Employed?
It’s perfectly possible to get a joint mortgage to buy a property when one applicant is Self-Employed and the other isn’t. How you earn an income doesn’t affect the type of mortgage that you need, only how you are assessed against the lender’s criteria.
If one applicant is a traditional PAYE employee, then the documentation that they need to supply in order to prove their income is likely to be less extensive than for the Self-Employed applicant. Other than that, there is really no difference, both applicants will be assessed against the same criteria.
When a Self-Employed mortgage applicant applies jointly with a fully employed partner, this can actually be beneficial to them, as PAYE income is still viewed as more stable than Self-Employed income, even if your partner earns substantially less.
How much can you borrow if one applicant is Self-Employed?
When your joint mortgage application is assessed, the Mortgage Lender will want to establish that between you, you can afford the repayments on your mortgage in the long term. How much you can borrow will be based on your combined income and credit score, regardless of how you earn a living.
Although both incomes will be used in the calculation, it may be beneficial to use the applicant who is not Self-Employed as the lead applicant. Because their income is perceived to be more stable, this can strengthen your application. The only situation where this would not be of benefit, is if your partner has poor credit.
What documents do you need if one applicant is Self-Employed?
The employed applicant will usually need to provide three months worth of payslips and bank statements to prove their income. For the Self-Employed applicant lenders require more substantial evidence of a stable income, so they will require two to three years worth of income evidenced for their current role.
The lender will usually calculate an average annual income for the Self-Employed applicant, using their income figures for two to three years requested, in order to mitigate some of the risk. How you prove your income will depend on your Self-Employed trading type.
Sole trader, Freelancer or Contractor
A Sole Traderor Freelance worker will need to provide SA302 tax returns for the duration requested by the lender. This is also sometimes the case for Contractors, although it’s likely that you will be required to provide evidence of ongoing contract availability.
If you are a contractor working on a day rate, some lenders will be willing to work with an annualised version of this, providing you can satisfy the other criteria
If you own a limited company, your personal salary and dividends payments will be used to calculate your average income. You will need to provide two to three years of accounts, as requested, which are authorised by a certified accountant, as well as SA302 forms, and in some cases, business banking statements.
Some more specialist lenders may be willing to consider your retained net business profits alongside your other income.
When you own a percentage of a limited company as a partner, you must own at least 25% in order for the income derived from the partnership to support your mortgage application. You can provide SA302 forms as evidence of this income.
Does a mortgage have to be in joint names?
In order to purchase a house together, both people do not need to be included on the mortgage. It’s possible to add your partner to the deeds of the property, without them being involved in the application process.
You should bear in mind, however, that a joint mortgage will afford you a higher loan, as it will be based on the combined income. Unless one applicant has very poor credit or very low income, you will probably benefit from applying jointly.