Sole Trader Mortgages

Updated 20th November 2021.

Sole Trader Mortgage Advisors.

This article will tell you everything you need to know about sole trader mortgages. Ordinarily known as self-employed mortgages.

We talk to people who are a sole trader or any self-employed person, they have been to their bank and been turned away, the frustrating thing is they aren’t told the reason why.

Therefore, this can leave the sole trader thinking they cannot get a mortgage, which simply isn’t true. Mortgage Experts Online have sole trader mortgages and self-employed mortgages experts ready to help.

Because each lender has different criteria when it comes to lending their money, as such, your mortgage expert will know exactly who to place you with for your circumstances.

An important factor to sole trader self-employed mortgages is presenting the information in the best way possible to the lender.

This sole trader article below will give you an insight to the different aspects of sole trader mortgages and what’s involved.

To speak to a mortgage expert call 0300 1245655 or click on our enquiry form.

Scroll down for more information and FAQ’s.

Sole Trader Mortgage Topics.

Can I get a mortgage if I’m a sole trader?

Yes, if you’re a sole trader the mortgage process is the same, the evidence you have to provide will depend on how long you’ve been trading and proving the mortgage is affordable.

Buying a house as a sole trader is possible and our mortgage experts help customers do this on a daily basis.

Before you can apply for a sole trader mortgage you must have been trading for a minimum of 12 months.

The more time you have been trading the more options will become available to you – once you have been trading for 24 months the options available will increase significantly.

If you have only been trading 12 months you will need a higher deposit than if you have been trading 24 months. Sole trader mortgages are about showing a mortgage lender that you can repay the mortgage, the rates for only having 12 months trading will be higher due to the perceived extra risk.

Sole traders can also work under the government scheme known as Construction Industry Scheme (CIS Mortgages). Some lenders will assess you as employed with 6 months remittance slips.

Our article on Construction Industry Scheme mortgages and how we can really get the most borrowing for Construction Industry Scheme workers, this can be found here. Using the CIS voucher when assessing mortgage affordability could also increase your borrowing. This is our case study here.

How do I prove my sole trader income?

Tax calculations & tax year overviews are the most common way to show income. Once completed and filed.  HMRC or your accountant will issue these documents to you.

These will show income declared and the tax to be paid, also any income from any rented properties or interest from savings and investments.

Documents can be downloaded from government gateway system by clicking here

Lenders might also request your SA 100 – this happens very rarely but can be requested. Because sole traders are not required to use an accountant its extremely rare for a lender to ask for this.

If you have certain expenses that are business related such as a van on hire purchase, then this can be deducted from the affordability which can boost your borrowing potential.

Subsequently, sole trader mortgage application are looked at in more depth, including the sustainability of income. However, with the right advice you can still get the mortgage you need.

Standard documents will also be required as any mortgage application.

  • Identity documents.
  • Proof of address.
  • Personal bank statements.
  • Proof of deposit.
  • Business bank statements.

How to print your documents from HMRC

For Tax Assessments (SA302s) you should:

  •  Log into their HMRC online account (go to online.hmrc.gov.uk)
  •  Select ‘Self-Assessment’.
  •  Follow the link ‘tax return options’.
  •  Choose the year from the drop down menu.
  •  Follow the link ‘view calculation’.
  •  Follow the link ‘view and print your calculation’.
  •  ‘Print your full calculation’.

For Tax Year Overviews you should:

  • Log into their HMRC online account.
  • Select ‘Self-Assessment’.
  • Follow the link ‘view account’.
  • Follow the link ‘tax years’.
  • Choose the year from the drop down menu and click the ‘Go’ button.
  • Follow the link ‘print your Tax Year Overview’.

Any lender may ask for additional documents once the case has been initially underwritten.

When lenders are assessing income for sole trade mortgages there is a cut off point for when the latest year must be used. The cut-off point is normally October the following the year, 18 months since your last figures.

There is a common misconception that once you have submitted your figures that the tax is then immediately payable, this isn’t the case, and the tax is due at the same time regardless of when submitting your accounts.

Your sole trader mortgage advisor will be able to explain this and any more questions.

How much deposit will I need for a sole trader mortgage?

One big factor for your sole trader mortgage will be the amount of time you have been trading. when you have been a sole trade for 12 months, then you will be looking at a 15% deposit.

After you have been trading 18 months and have an accountant’s projection for year 2 it could be possible with 10% deposit (this will also come down to several other factors).

Once you have 24 months trading then options can start from 10% deposit. If you have only been trading 12 months, read out article on 1 years account mortgages.

It it possible to have a 5% deposit and use the government backed Help to Buy scheme. All information is covered in our Help to Buy mortgage article, click here to read more

Bigger the deposit you have the stronger your case will look and the lower the interest rate will be.

Do you want more information about latest sole trader mortgages criteria? speak to one of our mortgage experts today.

What factors will affect my sole trader mortgage application?

All mortgage application will have basic requirements that the lender will need to check, the two main factors for sole trader mortgages are listed below.

Deposit

The higher deposits the bigger choice of lenders when compared to lower deposits. An applicant that needs an 70% LTV mortgage will often have more lenders to choose from when compared to an applicant going for a 90% LTV mortgage.

Being a sole trader does not mean that you will need a higher deposit than the salary man, but with any mortgage, the bigger the deposit the less perceived risk to the lender. However, lenders may request a higher deposit based on other circumstances such as bad credit or income levels.

Trading history

The amount of time you have been trading will influence the lenders decisions. Lenders will request at least 12 months trading history, with some lenders requesting up to 3 years.

The sustainability of your income will be paramount when lenders assess your application.

Lenders are often more comfortable lending when they can see a track history of income, when compared to a sole trader who has recently become self-employed. The industry you trade in can also play a part,

Best mortgage lenders for sole trader mortgages.

Much can vary according to your own circumstances, but the fact is that if a lender is offering mortgages, then they will have products for sole traders.

Our mortgage experts handle mortgage applications for all kinds of mortgage products, from those available at mainstream lenders and on the high street, through to specialist mortgages for niche markets from lenders who are accustomed to dealing with more complex applications.

Once we understand your individual situation and your needs, we will be able to show you the best lenders for the kinds of mortgage you are looking for.

There are not specific products for sole trader mortgages, but the way it is assessed is different for each lender. Knowing which lender will be most receptive to your application is vital when applying for a sole trader mortgage.

I’m a sole trader, can I remortgage?

You can remortgage with a sole trader mortgage. You might have been originally employed when taking out the mortgage and are now self-employed. Our experts will be able to explain all the options available around sole trader mortgages.

With any remortgage we will still need to meet the lenders criteria around affordability and credit history, our experts will be on hand to give you the right advice.

If you are not eligible for a sole trade remortgage, then a product transfer might be the answer.

Our mortgage experts will look at all the options available to you and present them in a clear manner.

To read all about remortgages click here.

Sole trader buy-to-let mortgage.

The criteria for a sole trader mortgage buying a buy to let is simpler. Most lender only require 12 months trading history and evidence in the form of tax calculation & tax year overview.

You will still need to pass the lender credit score or credit profile.

The rent achievable on the property will need to be acceptable to lender and pass their “Stress Test”. It can be possible to use earned income if the rent achievable is falling short, this is called top slicing.

Some lenders have a minimum income figure of 25K for first time landlords. For the most up to date information contact us today. To read all about buy to let mortgages click here.

Can I get a sole trader mortgage in Scotland?

Yes, the mortgage advisors we work with are vastly experienced in arranging mortgages in Scotland. Sole trader mortgages follow the same principal as the rest of the UK.

There are some restrictions on properties in certain post codes with some lenders. Our experts can help you arrange a sole trader mortgage in Scotland.

To access the absolute best deal for your sole trader mortgage, contact us today.

I have bad credit can I get a sole trader mortgage?

Yes, the criteria for bad credit is the same if you’re employed or self-employed.

If you have only been trading 12 months the options are more limited but not impossible. Our experts have arranged sole trader mortgages with bad credit such as:

Because all sole trader mortgages are different, the best advice is to speak to an expert. Our mortgage experts will be able to guide you through the entire process and ensure you receive the best rate and borrowing amount for your circumstances.

To read more about bad credit mortgage, click here to read out article

Speak to a sole trader mortgage advisor.

There are many lenders available ranging from high street to specialist lenders. Most people go to their own bank, get declined or cannot borrow what they need, however, just because one lender has declined you, do not 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.

Therefore, all our expert brokers we work with have experience in dealing with all aspects of sole trader mortgages, and importantly using the whole of the market to access the very best deals available.

To find out how we can help call us on 0300 124 5655 or complete our quick enquiry form to speak to a mortgage expert.

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