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Self-Employed Mortgages - A Guide

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Self-employed mortgages FAQ

We have collated some information to help explain how self-employed mortgages work. And to show that it’s possible to get a self-employed mortgage, even if you’ve been turned away due to a lack of accounts or adverse credit.

Use the links to jump to the information you need:

If you would like to talk to an advisor about your own circumstances and how it might affect your ability to get a mortgage, call 0808 189 2301 or make an enquiry.

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We’ll match you with one of the expert brokers we work with, ensuring that they have experience of helping customers in similar situations. They will be able to answer your questions and help you find the right mortgage solution, based on your circumstances.

How long do you have to be self-employed to get a mortgage?

If you are self-employed you will have the widest choice of lenders available if you have been self-employed for 3 years or more and have accounts to support your application.

However, there are lenders who will accept fewer years of self-employment, if you also meet the required affordability criteria. A healthy deposit will always help you get the best available rates too.

Which lenders cater for the self employed?

It’s important to remember that every lender is different. They all have a varied opinion on a massive range of criteria, which can make finding the right mortgage very complex.

Some lenders consider businesses that have had a decline in profits in recent years, some decline it if takings were as small as £1 less!

This criteria changes all the time, as every lender alters their stance on what is and is not acceptable – for this reason it would be inappropriate to list lenders as it could very soon be outdated. So, if you’re self employed and looking to get a mortgage, the best advice would be to find a specialist broker that knows when and where the best deals are to be had, and which lenders would consider an application before you even start.

Can I use Help to Buy if I’m self-employed?

Self-employed Help to Buy scheme mortgages are harder to come by if you only have 1 or 2 years accounts or trading history, but they do exist and often at great rates too.

If you have been self-employed for over 3 years with accounts or tax returns as evidence, you can pretty much qualify for the same mortgages as everyone else.

If you don’t yet have 1 years accounts then it’s not possible to get residential mortgages these days, but if you’re close to finishing your first tax year then the advisors can work with your accountant to establish the declared minimum income required for the borrowing you need.

Is it harder to get a mortgage if self-employed?

Getting a mortgage is harder than it used to be, and not just for self-employed applicants. Since FCA regulations came in following the credit crunch, and due to the lack of money available at that time, things really tightened up.

This meant that lenders had to pick and chose who they gave their money to. As a result, self certified mortgages were removed from the market (although it is still possible to get a self-cert secured loan if you are looking for additional borrowing).

This means that a self-employed builder or taxi driver, writing off profit as expenses and declaring less income, will find it much harder to borrow to the same levels, if at all.

This has created difficulties in buying and moving, and in some cases created mortgage ‘traps’ where customers have been lent money pre-regulation, and are now unable to find any other lender to take their mortgage on under the same terms.

I’ve been declined by my bank, can I still get a mortgage?

With mortgages for self-employed applicants it’s important to remember that every lender does things differently. Each lender occupies a different corner of the market, so it’s important not to give up if you’ve been declined with one lender as it doesn’t automatically mean another lender will decline your application.

Within each sector, different lenders still have differing criteria, some will lend on concrete properties, and some won’t. Some will let you get a buy-to-let mortgage as a first-time buyer, some won’t. Similarly, some will lend to the self-employed, some won’t.

Specialist mortgage broker services that have whole-of-market access will be able to put you in front of lenders with a more flexible attitude – and there are a few reputable organisations out there that you won’t see on the high street (and probably won’t have heard of!) that you can only access through a broker.

All the brokers we work with are whole-of-market experts and can help you find the right mortgage solution. Make an enquiry for a free, no obligation chat and we’ll connect you with a broker who can help you.

Can I get a self-employed mortgage without proof of income?

Self-employed mortgage loans used to be ten a penny. Now, self-cert mortgages no longer exist in their traditional form so getting finance for self-employed customers can be tough.

However, if you’re looking to borrow additional money from your home then certain lenders do offer a secured loan without proof of income in many cases.

The FCA has imposed regulation to put the responsibility of lending on the organisation rather than the individual. Therefore, lenders have an obligation to ‘lend responsibly’, requiring them to ensure that the borrower is in a position, now and in the future, to meet both the mortgage and other household commitments.

The last thing a borrower needs is to be given a mortgage commitment for 25 years to then find they can’t actually afford to repay that mortgage and have to leave their home.

It’s important for lenders to ensure a borrower is able to repay anything they lend out in a manner that would stand up in court should the borrower default. To do this they have to show they verified the income and the entire application sufficiently. The historical self cert mortgages sidestepped this entirely, which is one of the main reasons they no longer exist for loans regulated by the FCA.

What do you need for a self-employed mortgage?

If you’re self-employed and need a mortgage, the main way a lender will verify your income is through:

  • Payslips / p60’s / employer references
  • Benefit / Pension statements
  • SA302 tax returns – Self-employed accounts.

Most of the main lenders you’ll know about will require up to 3 years accounts and sometimes more.

BUT if you’ve only been trading a year, don’t worry. There are mortgage lenders that will lend to you with 1 year in the right circumstances.

I have a complex situation, what can I do?

Mortgages for self-employed people are often more complex than for employed applicants, and careful advice is required.

The right broker may be able to get in touch with underwriters/business development managers (decision makers) who look at things on a case by case basis.

Lenders can then consider accountants references, those paid in cash, and a range of other income evidence that may differ from what your main high street bank would ask.

Tell us about your situation and see how the advisors we work with can help.

What income can I use?

The income lenders usually accept is:

    • Gross basic income
    • Bonus
    • Overtime
    • Commission
    • Car / town / shift allowances
    • Mortgage subsidy
    • Other cash employer benefits
    • Net profit (if using accounts)
    • Total income received (if using SA302’s)
    • Your share of net profit (if using accounts)
    • Your share of total income received (if using SA302’s)
    •  Your share of directors salary
    • Your share of dividends
    • Occasionally lenders can consider net profit if there has been a large business expense or a sum earned but left in the business and not withdrawn.

Most lenders will require at least 3 years accounts. However, there are some lenders that accept 2 or even 1 year’s accounts.

The important thing to note here is that if you’re having trouble finding a lender to accept your unique situation don’t give up. Give us a call, leave a message on the live chat, or make an enquiry and see how one of the self-employed specialists we work with can help.

Ways to prove income

Standard evidence:

  • SA302 self assessment tax returns
  • Finalised accounts
  • Projected accounts

More flexible lenders can use qualified accountants references to show:

  • Pay slips from your own company/family company
  • Handwritten payslips – if paid in cash.

Occasionally, lenders can accept proof of rental income using the tenancy agreement and bank statements.

What other incomes might lenders accept?

  • Investment income
  • Rental income
  • Trust income
  • Income earned overseas
  • Income earned in a foreign currency
  • Bursary
  • Stipend
  • Pension
  • State benefits
  • And more…

How to get the best deal if you’re self-employed

You may have had trouble finding the best mortgage companies for self employed mortgages, and found getting a mortgage approved difficult. Thankfully, where certain lenders find fault and decline seemingly for no reason, others are happy to lend – every lender has different opinion and criteria.

Firstly, establish how long you have been trading – if 3 years or more then you pretty much have access to the entire market. If you only have 2 or 1 years accounts then it will limit your options to a few lenders.

The main sticking points for most of our self employed mortgage hunters is credit history and number of years accounts, and often these go hand in hand. If you have a poor credit history, then depending on which problems you’ve had, only certain lenders will consider you – and these may then require a longer trading history.

If you only have 1 years accounts for example then you’ll need to be clean credit with 10% deposit, or with 15% you can potentially find a mortgage so long as you’ve not had any defaults, CCJs, IVAs, mortgages arrears or bankruptcy in the last 2 years. If you have more severe credit problems then you’ll most likely need a larger deposit (25%+) and 3 years accounts.

This criteria as ever, changes all the time so finding the best mortgage company for self employed borrowers is not always straightforward if you’re doing it on your own. The rates table above often won’t take into account these more specific details.We strongly advise that you get in touch and one of the experts with the latest and most up to date criteria who can provide you with a comprehensive mortgage quote.

Are there mortgages for self-employed borrowers with bad credit?

Yes! There are mortgages for those who fall into both the self employed and bad credit categories, but your choice of lenders will be fewer because you belong to two niches.

You will need to find a specialist provider who offers mortgages to the self employed and customers with adverse credit. Moreover, the lender will also need to have an appetite for risk since borrowers who tick both of these boxes are considered higher risk by some.

We’ve already discussed how there are lenders out there who specialise in self employed mortgages, and the good news is that there are bad credit lenders too, providers who are happy to deal with customers with one or more of the issues listed below on their file.

  • No credit history
  • Low credit score
  • Late payments
  • Missed mortgage payments
  • Defaults
  • CCJs
  • IVAs
  • Debt management Schemes
  • Repossessions
  • Bankruptcy
  • Payday Loans

While some banks and building societies might turn you away outright or offer you unfavourable rates if you have any of the above on your record, specialist bad credit lenders will look at the age of the credit issue (the older, the better), its severity (a missed phone bill payment is less severe than a recent bankruptcy or repossession, for example), as well as how closely you meet their other eligibility and affordability requirements.

If you belong to two niche categories (in this case bad credit and self employed), it’s especially important to seek specialist advice from a broker with access to the entire market to make sure you end up with the best deal. If you make an enquiry, the experts we work with can connect you with the lender best positioned to offer favourable rates to a customer who is self employed and a member of the adverse credit club.

Are small lenders safe?

Firstly, if your mortgage was with a lender that failed, the likelihood of a repossession order falling at your door is very remote. History shows that when a lending book goes bad, another institution has come in to buy it out.

It may even have some benefits if your lender is struggling for cash. For example, in the case of Northern Rock, borrowers were given the chance to re-mortgage away to another lender with no early repayment charges. As rates dropped across the market this allowed those tied in on high fixed rates to shop around for better deals without penalty.

At one time, some lenders were even offering customers thousands of pounds worth of discount each, to repay their loan early in an attempt to get funds back on the balance sheet.

With the bailout of Lloyds banking group and others, the UK government has reinforced its promise to prevent any financial institution from failing. This commitment covers all lenders, regardless of size.

The Financial Services Compensation Scheme (FSCS) places no stipulation on the size of institutions. Therefore, as long as the mortgage is regulated by the Financial Conduct Authority, you’ll still be able to use the scheme to claim compensation if anything goes wrong.

Although the mortgage market is impossible to predict with 100% certainty, it may be prudent to accept that your mortgage will need to be with a lender other than one of the big high street names.

Smaller banks and building societies frequently offer exclusive rates and exceptionally good deals. One of the major benefits many of our customers gain from borrowing from smaller lenders is through their more diverse criteria. When you’re struggling to find a mortgage these may just come up with something for you.

This criteria may be how many years’ accounts they require, or what percentage of benefit income they’ll accept, etc. It is also thought that how they lend and who they are willing to lend to can be more flexible.

The expert whole-of-market brokers we work with work with small lenders all the time, successfully arranging mortgages for people who might otherwise struggle to find a mortgage on the high street.

Make an enquiry for a free, no obligation chat and we’ll match you with a broker who has experience in helping customers in similar situations to find the right mortgage solution.

What mortgages are self-employed applicants are eligible for?

Any mortgage for self-employed applicants will almost always be the same as for employed applicants.

Very rarely are there any products that specifically include or exclude self-employed people.

It just depends on which lender will accept you – so as long as you’re eligible, you should have the same range available as anyone.

Speak to an expert

Are you ready to take the next step? Make an enquiry with us and we’ll introduce you to a mortgage broker who specialises in self-employed customers.

Speaking to an expert who deals with self-employed customers every day means you will be introduced to the right lender first time, which could potentially save you time and money in the long run.

We won’t charge a fee to find you your perfect broker, your credit report won’t be affected and there’s absolutely no obligation!

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Mortgages for the self employed

Access to specialist self employed lenders offering tailor-made mortgages – even to those with bad credit history.