Updated 21st September 2021
Many people wonder if they can get a mortgage if they’re self-employed, and the answer is yes! But it’s important to remember that not all lenders will be willing to offer a self-employed mortgage, and you may need to meet certain criteria in order to be accepted from those that do.
So, what do you need to know?
Keeping proper records
A mortgage is an investment for the mortgage company, an investment in you, and before they make that investment, they need to know you’re going to be able to make your payments. How do they do that when you’re self-employed? They look at your business finances. This means that if you’re going to have the best chance of getting a mortgage, your business finances need to be accurate, detailed, and go back at least two years
A mortgage lender is going to want a picture of what your average earnings look like, so they can satisfy themselves you will be able to meet your mortgage commitments whether business is good or bad. It’s also possible that they may want to have access to any financial forecasts that you may have for the next few years, to ensure your profitability is going to be as consistent as possible.
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When can you apply?
If you started your business last week, you’re not going to be able to apply for a mortgage. It’s as simple as that. A mortgage company is only going to entertain your application after you have been trading, officially, for a certain amount of time. Depending on the value of the property you want to buy this can be anything from six months to two years plus of trading.
They may also want some details about any ongoing contracts that you have, if your sub-contract long term, or what your plans for business expansion are. A mortgage lender will want the most accurate picture of your business they can get before agreeing to finance your mortgage.
Can I get a self-employed mortgage with bad credit?
All self-employed mortgages have options available with bad credit mortgage lenders, so just because you have had a blip in your credit history that is not to say that you cannot achieve the level of lending you require.
Bad credit mortgages are available and will come down to the severity of the adverse credit and how recent the issue was. The mortgage experts we work with are highly skilled and arrange bad credit mortgages every day.
Sole trader mortgages
The easiest and most common way to prove income is via tax calculation & tax year overviews. If you have completed your tax return with HMRC then they will issue these documents to you. They simply tell you what income has been declared and the tax to be paid and will also show any income from any rented properties or interest from savings and investments. You can download the information on the government gateway system.
There are options available for self-employed applicants from as little as 12 months trading history, however these options are limited and may be subject to restricted loan to values.
Sole traders will need to prove their income is sustainable and this is why high street lenders work off a 2 year average earnings.
Fixed term contractor mortgages
Fixed term contracts are typically for 3, 6, or 12 months, and can be on a temporary or permanent basis. There are lenders available who will look to lend based on the contract amount (rather than going off the self-assessment tax returns), and you would be expected to have been working on this basis for a minimum of 3-12 months depending on the lender).
Lenders would also like to see between 3-12 months left on a contract to show sustainability, or at least evidence that the contract is going to be renewed – this again will depend on the lender.
Things can get a little more complicated when the contract is temporary, through an agency, or paid via an umbrella company – however that is not to say they are impossible to arrange.
Speak to a self-employed mortgage expert
There are many lenders available ranging from high street to specialist lenders. Most people go to their own bank, get declined or can’t borrow what they need – just because one lender has declined you, don’t give up.
Our mortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. All the mortgage brokers we work with are whole of market and offer unbiased advice. They will have access to all the specialist lenders to really enhance your chances of achieving the mortgage you need.
The expert brokers we work with have experience in dealing with all aspects of self-employed mortgages, and importantly using the whole of the market to access the very best deals available.