If you are self-employed and looking to get a mortgage, there are a few key bits of information you need to be aware of. Mortgages for those who are self-employed take a bit more effort to secure due to the need to prove a consistent and reliable income, but with a few extra steps you should be able to find a deal that works for you.
It can be more difficult to secure a mortgage if you are self-employed, but it is certainly not impossible and there are many options available to you. There is no such thing as a ‘self-employed mortgage’ and you will be applying for the same types of mortgages as everyone else, which means that you won’t be expected to pay higher rates. The main aspect that makes it tougher for those who are self-employed is the stringency of the rules set out by lenders. For example, you may be expected to pay a higher deposit than those who do not work for themselves.
Yes, there are many banks that provide mortgages that will be applicable to those who are self-employed. They will consider you in the same way they consider anyone else and your self-employed status will not stop you from this. There used to be such a thing as a self-certification mortgage, which allowed the self-employed to declare how much they earn per year without needing to give evidence, however these were banned in 2014 due to people being accepted for mortgages they weren’t able to afford.
Generally, mortgage lenders will need to see 2-3 years’ worth of accounts from your business to accurately gauge your income and affordability. If you have not been self-employed for this amount of time, it is still possible to get a mortgage but you may be required to provide further evidence, such as bank statements and proof of deposit funds.
Mortgage lenders look at the self-employed as being business owners that own more than 20% of a business that you receive your main income from. You’ll be set into one of three categories:
– Sole trader, e.g., freelancer or contractor. You’ll need to provide a tax-assessment form and show evidence of your income via the HMC’s SA032 form.
– Business partner; for which you’ll need to proof of your ownership of your share of the business as well as its profits.
– Limited company; you will need to showcase your salary and dividends and how much you earn from your company.
Your credit rating and size of deposit will also be assessed, so it is wise to bring the highest possible deposit to the table as this will increase your affordability in the lender’s eyes.
Depending on your deposit and individual circumstances, you can expect to borrow up to 4.5 times your annual income, which is the same offer made to most mortgage applicants regardless of employment status. Again, a higher deposit will help you widen your scope of deals, so save up as much as you can in order to make the most of the offers available to you.