One of the most common misconceptions in the mortgage market is that it’s nearly impossible for a self-employed individual to borrow money to buy a home. It’s not. Yes, post-credit crunch the high street lenders have tightened their lending criteria, but this is the case across the full range of mortgage products.
In reality, the self-employed, freelancers, sole traders, those in partnerships, and contractors with their own limited company, should all be able to find a competitive mortgage deal. And, it’s not always the case that you need three years’ proof of earnings, as the requirements change from lender to lender.
What do you need to find a self-employed mortgage?
If you’re looking for a self-employed mortgage, you will have to jump through more hoops to prove your income than an employee on the payroll. When calculating how much they’re willing to let you borrow, lenders will generally base their calculations on the average profit you have made over the last few years. Some self-employed mortgage specialists will want to see three years’ accounts, while others will be happy with two.
Some lenders will only consider figures that have been put together by a chartered or certified accountant, so that’s certainly something to consider. They will also expect your accounts to be up to date and in order before you apply for the loan.
Even if you do not have two years of accounts, it does not necessarily spell the end of your application. Some self-employed mortgage specialists will still consider your application, as long as you have a proven track record of work, you have left employment to work as a contractor in the same industry, or you have evidence of work lined up for the future.
However, almost all self-employed mortgage specialists will expect you to have:
- A track record of regular work
- A healthy deposit
- A good credit history
- An accountant
Mortgages for sole traders
For sole traders, maintaining your accounts should be fairly straightforward, and importantly, you get to keep all the profits. If you’re looking for mortgages for sole traders, it is these profits that lenders will take into account when considering the amount they are willing to lend. If you file your tax accounts using the self-assessment system, you may also receive a form called an SA302, which contains a summary of your total income and the tax due. Most lenders will also want to see this form.
Mortgages for company directors/owners
Mortgages for company directors/owners are a little different to the above, in that company directors will typically pay themselves a basic salary plus a company dividend. In this case, the lender will want to see evidence of, and take into account both aspects of your income when assessing the mortgage’s affordability.
How can we help?
We work with a network of leading self-employed mortgage specialists who know which lenders are willing to accept, and offer the best deals to the self-employed, sole traders and company directors. Please complete an enquiry form with your requirements and an expert advisor will be in touch to provide a free, no-obligation consultation.