When you’re self-employed, getting a mortgage, whether for a first time buyer mortgage or to remortgage, the process will be slightly different compared to those who are employed by a company.
At The Levels Financial, we understand that being self-employed comes with a wide range of responsibilities and lots of plates to spin. As local and trustworthy mortgage advisors, we are often asked if it is hard to get a mortgage when self-employed and if being self-employed affects the amount you can borrow. In this blog post, we will aim to put your mind at ease and highlight how you can get a mortgage when you’re self-employed.
- When Do You Count As Self-Employed?
- How Long Do You Have To Be Self-Employed To Apply For A Mortgage
- What Documents To Provide When Self-Employed?
- How Do You Get A Mortgage When Self-Employed?
- Self-Employed Mortgage – Frequently Asked Questions
- Require Help To Apply For Your Self-Employed Mortgage?
When Do You Count As Self-Employed?
When applying for a mortgage it is important to understand what lenders view you as, whether they view you as a self-employed person, as a partner in a business or as an employee. Lenders will view you as self-employed if you own more than 20% to 25% of a business, which contributes to your main income.
This could be that you identify as a sole trader, company director, contractor or partner. Based on the category you are in, lenders could have different requests and evidence needed for you.
Limited Company – If you own a registered limited company, which you then pay yourself your salary and dividends, your lender will want to know how much your combined earnings (salary, dividends and others) amount to.
Business Partner – If you have one or more business partners lenders will ask to see proof of your share of the business’s profits as well as any salary you may take.
Sole Trader – As a contractor or freelancer, you will be classified as a sole trader by lenders. In this case, you will need to fill out a tax self-assessment form, which will need to be checked and approved by an accountant. You will then need to provide your lender with an SA032 form (which you can get from HMRC).
How Long Do You Have To Be Self-Employed To Apply For A Mortgage
Another question that our Yeovil mortgage advisors often answer is how long someone needs to have been self-employed to be able to apply for a mortgage. This will all depend on your circumstances, including your savings, your budget and whether you’re purchasing the home alone or with another person.
Regardless of how long you’ve been self-employed, it is recommended that you have well-kept accounts and clear books on all of your finances. Then, our specialist mortgage advisors will be able to contact our lenders (we have access to over 12,000 mortgages available from 90 lenders), to help find the right mortgage for you.
What Documents To Provide When Self-Employed?
When applying for any mortgage, there is a lot of information and documentation that you will need to provide to prove to your lender that you are a reliable and trustworthy investment, as well as showing you are able to meet your monthly mortgage repayments.
Documents that you will need to provide to your mortgage lender, as a self-employed borrower, include:
Income evidence:
- Two or more years of certified accounts
- SA302 forms or a tax year overview (both available from HMRC) will then need to be countersigned by your accountant
- If you’re contractor evidence of any upcoming contracts
- If you’re a company director, evidence of dividend payments or retained profits
Identity evidence:
- Passport
- Driving licence
- Proof of address (this can be in the form of a council tax bill or utility bill dated within the last three months)
- Six months’ worth of bank statements
- Proof of any savings
Lenders may also ask for:
- Household bills
- Travel and commuting costs
- Childcare
- Holidays
- Socialising
- Hobbies
- Credit card or store card repayments
- Loan repayments
- Car finance repayments
- Catalogue of credit accounts
Applying for any mortgage often comes with a lot of documentation and hoops to jump through, see our guides here:
- A guide to shared ownership mortgages
- Maternity leave mortgage applications – FAQs
- All you need to know about track record mortgages
- Is remortgaging right for you? A step-by-step guide
- A guide: First time buyer mortgage advice
How Do You Get A Mortgage When Self-Employed?
Contrary to popular belief there isn’t a specific mortgage type that you need to get if you’re self-employed. You will be eligible to apply for any UK mortgage type, which you can read more about in our blog post: ‘A complete guide to UK mortgage types’.
However, as a self-employed person, you may need to provide additional information and evidence that you have a reliable income from your business.
Self-Cert Mortgages
There used to be a mortgage known as a ‘self-certification’ or ‘self-cert’ mortgage which was specifically designed for those who are self-employed, allowing people to self-certify how much they earn annually, without needing to evidence it.
However, due to the increased concern that self-cert mortgages were allowing loans to be accepted for mortgages they potentially couldn’t afford, they were banned in 2014.
Self-Employed Mortgage – Frequently Asked Questions
When you apply for any mortgage, there is a lot of information to digest, documents to find and details to submit. Which, at times, can be confusing. This is why our team of mortgage experts have put together a list of the most frequently asked questions when talking about self-employed mortgage applications.
If your question isn’t answered below, feel free to get in touch with our team, who will be able to help you further.
Can You Get A Mortgage With Three Months Self-Employment?
It is important to provide as much evidence as possible that you have access to adequate funds and earnings when applying for a mortgage. You can get a mortgage with as little as three months of self-employment, although most lenders do prefer having two-three years of accounts.
You may have fewer mortgage options and have to provide additional information and answer further questions. However, our team will be able to help you every step of the way.
I’m Self-Employed – How Big A Mortgage Loan Can I Claim?
No matter your job, typically speaking most lenders will allow you to borrow up to 4.5 times your annual salary. However, depending on your lender you may be able to borrow more or less.
How Many Payslips Do You Need For A Mortgage Application?
When applying for a mortgage, whether employed or self-employed, you will need to provide evidence of your income. This proof of salary is normally in the form of three months’ worth of paychecks.
Can I Get A Mortgage If I’m A Business Partner?
Yes, you can get a mortgage if you’re a business partner or owner, you will just need to provide evidence of your income. You will also need to provide all the relevant documentation.
What Proof Of Earnings Do I Need When Applying For A Self-Employed? Mortgage?
You will need to provide proof of income, proof of identity and bank statements, in the form of some or all of the documentation we mention above.
How Much Can Your Borrow For A Mortgage When Self-Employed?
Typically, lenders will loan you 4.5 times your annual salary. This is calculated based on your average net profit, from the last three years of accounts.
Require Help To Apply For Your Self-Employed Mortgage?
At The Levels Financial, we pride ourselves on helping our clients find the right mortgage deal. So if you’re struggling to find a mortgage, whether self-employed or not, our team of highly experienced mortgage advisors are on hand to advise.
For more information, book your free initial consultation today, by contacting our team at admin@thelevelsfinancial.co.uk or call us at 01458 772 040 and we will be happy to help with any of your mortgage or remortgaging concerns.
Important information:
- If you remortgage, you may have to pay an early repayment charge to your existing lender.
- If you do not keep up with your mortgage repayments your home may be repossessed.
- A fee may be included for mortgage advice. The actual mortgage amount you pay will differ depending on your circumstances. Fees can be up to 1%, but typically a fee is 0.3% of the borrowed amount.
