Mortgage and Self-Employed: How Does It Work?

Are you running your own business and want to get on the property ladder?

We understand that being self-employed puts you in a unique position, your income may vary, making it difficult to get a mortgage with most traditional lenders. Truth be told, without a contract of employment or regular payslips, it can be a bit tougher to convince lenders that you’re not a risk.

But don’t despair because being self-employed isn’t a barrier to being accepted for a mortgage.

Self-Employed Mortgage Does Not Exist

First off, there is no such thing as a ‘self-employed mortgage’, whether you’re employed or self-employed makes no difference to the range of mortgage products that you’re entitled to in the UK.

A lot of the confusion comes from the ban of ‘self-certification mortgages’, known as ‘liar loans’, by the Financial Conduct Authority (FCA) back in 2011. Those enabled people to borrow money to buy a home without having to prove their income. Nowadays, self-employed need to apply for a mortgage in the same way as everyone else but lenders just need to know about your ability to repay.

Getting a Mortgage When Self-Employed

Lenders will view you as self-employed if you own more than 20% to 25% of a business, from which you earn your main income. You could be a sole trader, company director, or contractor.

To prove your income when you apply for a self-employed mortgage, you will need to provide:

  • Two or more years’ certified accounts
  • Evidence of your earnings from HMRC (form SA302)
  • Proof of upcoming work if you are a contractor
  • Evidence of dividend payments or retained profits if you’re a company director

How To Improve Your Chances

There are things that you can do to increase your chances of being able to buy a home such as having an up-to-date account signed off by an accountant and save for a bigger deposit. The bigger the deposit you’ve got, the easier it is to secure a mortgage at a good rate.

However, the main tip we can give you is to consult a professional mortgage advisor, who will know exactly what lenders expect to see and can help you find the right deals. Besides, if you apply for a mortgage and the lender rejects you, it will be recorded on your credit file, which could damage your credit score.

GPD Mortgage Solutions can save you time and money by helping you navigating and understanding the housing market, we have plenty of experience when it comes to finding the right deals for you whatever your employment situation.  If you need any advice, don’t hesitate to get in touch today.