Self-Employed Mortgages

Getting a self-employed mortgage can be more challenging than getting a residential mortgage, with lenders applying more stringent eligibility criteria.

With more than four million self-employed people in the UK, it can feel like a large part of the workforce is made to jump through extra hoops to get on the property ladder.

In this article, we’ll explain how to get a mortgage if you’re self-employed, what information lenders will want to see on your application and why using the services of a specialist mortgage broker can boost your chances of success. For more information on your specific circumstances, view our dedicated self-employed mortgages page, which has links to all our content on this topic.

Whether you’re a first-time buyer or considering remortgaging, we’re here to help guide you.

Can I get a mortgage if I’m self-employed?

Yes, you can get a mortgage if you’re self-employed, but you’re likely to face more stringent affordability checks and eligibility criteria than a first-time buyer who’s not self-employed, for instance.

Your income is an important factor in whether lenders will loan you. Some lenders will be wary of lending to you if you can’t provide at least two years of accounts that show stable income from multiple sources or consistent income from one.

Some lenders will be willing to offer you a mortgage if you have one year of accounts or less, but it’s likely to be more difficult to get approved.

How do self-employed mortgages work?

The way income is assessed during the application process is what sets mortgages for self-employed people apart from other types of residential home loans. The time you’ve been self-employed and your trading status (sole trader, director, etc.) would also be factors.

Rather than using a basic annual salary figure (as with someone employed) and applying an income multiple, most providers will calculate how much you can borrow using a multiple of your average self-employed earnings over the last two or three years.

Some mortgage lenders can be more generous and flexible towards self-employed customers, so using a broker is highly recommended. A broker can ensure you’re paired with the best-positioned lender to offer the top rates.

How long do you need to have been self-employed to secure a mortgage?

Lenders will apply different criteria depending on whether you’re a sole trader, contractor, company director or in a partnership. However, as a general rule, most lenders require two to three years of accounts, with a minimum of 12 months in most cases.

Some lenders will consider your application after just 9 to 12 months. Still, you would typically need to demonstrate a strong track record in your industry and prove that your income is sustainable enough to secure approval under these circumstances.

Different types of self-employment

As the definition of self-employed varies by lender, it’s useful to know if you will be classified as self-employed. Most lenders will consider you self-employed if you own more than a 20% share in a business that pays your income.

Below are some of the most common types of self-employment:

• Sole trader: If you run a business by yourself, lenders will likely classify you as a sole trader.
• Director/Partner: If you’re a director or partner in a limited company, the business’s responsibility is shared. You won’t be classed as a sole trader because it’s not one person’s sole responsibility.
• Contractor: A contractor provides services or skills to a business for a set period of time. Most lenders will consider you a sole trader unless you run your own limited company.
• Freelancer: Freelancers are similar to contractors, providing services for a set period. Most lenders will classify freelancers as sole traders.
• Agency workers: Most agency workers aren’t considered self-employed, as they will likely be paid via an ‘umbrella’ company. However, people working for an umbrella company will likely experience similar issues getting a mortgage to self-employed workers.

It’s best to speak to a broker if you’re an agency worker struggling to get a mortgage or are self-employed and need help with the application process. A broker can guide you through the process and potentially help you get approved.

How will you be assessed?

In addition to the above, lenders may have specific requests and expectations depending on the type of self-employed worker you are. Some of them are listed below:

• Sole trader: Most lenders will classify contractors and freelancers as sole traders. In this instance, you’ll need to provide a tax self-assessment signed by an accountant. Your lender will also need to confirm your income via a SA302 form.
• Business partner: If you have a business with one or more partners, mortgage lenders will ask to see proof of your share of the profits.
• Limited company: If you own a limited company, you pay your salary and dividends. Lenders will want to know what your earnings add up to

What do you need to apply for a self-employed mortgage?

The requirements for a self-employed mortgage are as follows…

• Proof of income: You will need to provide documents that prove your income, such as an SA302 tax overview. Most lenders calculate your earnings over two or three years of accounts, but there are providers who will consider self-employed mortgage applications based on one year’s accounts or less.
• Deposit requirements: Deposit requirements for a mortgage when self-employed are usually no different from other types of residential agreements. Most lenders will expect you to put down at least 10%, but this could rise depending on the level of risk. For instance, if you only have one year’s trading history, the lender might ask for a 15% deposit to offset the risk. Low deposit deals could also be available, usually through flexible lenders.
• Credit history: Self-employed customers with bad credit might find it more difficult to secure the mortgage they’re looking for. This is because some mortgage lenders will turn you away outright if you’ve had credit problems, but with the help of a broker, it’s possible to find lenders who will accept a self-employed customer for a bad credit mortgage. The broker will ensure no unnecessary credit checks are completed for a mortgage.
• Age limits: You will find that some providers impose age restrictions on their self-employed mortgage products. Most will be wary if the mortgage term extends beyond your 75th birthday, but some will lend to customers aged 85, and a minority have no age limits at all.
• Savings: If you have decent savings, this could work in your favour as it shows you can manage your money despite fluctuations in income.

How to improve your chances of securing a mortgage

Before you submit a mortgage application, there are several things you can do to give yourself a better chance of getting the mortgage you need if you’re self-employed, such as:

• Saving up as much deposit as you can (anything above 20%-25% will open up a bigger pool of lenders to your application)
• Preparing all the correct documents – properly certified accounts, etc. – to confirm your level of earnings and any additional information (financial projections for the next 12 months, for example)
• Checking your credit history thoroughly and removing any information that’s either out of date or inaccurate
• Ensure you’re registered on the electoral roll, as this will lower your credit score if you’re not.
• Consider waiting until you have at least 2 years of certified accounts available.

How do you get a self-employed mortgage?

Your first recommended step is to speak with a mortgage broker with experience arranging mortgages for the self-employed. If you make an enquiry with us, our broker-matching service will be able to match you up with the right advisor.

Your mortgage broker will then be able to help with the following: 

• Preparing the right documents: You must evidence certified accounts and/or your latest SA302 tax overview document to prove your income. Lenders can request up to three years’ worth, but your broker can also help find mortgage options for those with only 12 months. You can find a full list of the documents you’ll need in our guide to mortgage applications.
• Download and optimise your credit reports: Once you’ve downloaded your credit reports, your broker will help to identify any inaccurate or outdated information that could hinder your application.  
• Finding the right mortgage lenders: Your mortgage broker will be able to quickly identify those lenders who look more favourably on self-employed applicants. Saving you time and, potentially, some money. This is particularly important if you don’t yet have a long trading history and certified accounts or have had some credit issues reported on your record recently. 
• Get an agreement in principle: Once you have an agreement in principle (AIP) in place, this will indicate how much you can borrow. Remember, an AIP is not a guarantee you’ll be approved for a mortgage, but it does show estate agents and sellers you’re serious about purchasing a property.

How much will a mortgage broker cost if you’re self-employed? 

It depends on the complexity of the application, but typically, mortgage brokers will either charge a flat fee of between £500 and £1,000 or a percentage of the amount borrowed of between 1% and 2%, usually payable once the mortgage has been completed.

Some mortgage brokers may not charge a fee and simply take a percentage of the process fee directly from the lender upon completion. 

Do self-employed people have to pay higher mortgage rates?

Not necessarily. If you can provide enough information about your income, you should be able to get a similar mortgage deal to someone in permanent, full-time employment.

The size of your deposit and credit rating are more likely to affect the rate you’re offered than whether you’re self-employed.

The larger your deposit and the higher your credit rating, the more likely you’ll be offered a favourable mortgage rate.

How to get the best rates

To get the best rates on a self-employed mortgage, save up as much deposit as possible, make sure your credit report is in good shape and collect three years of accounts. While some providers will lend to customers without all these things, the more boxes you can tick, the more lenders you’ll have to choose from.

Check out our rates table below to get an idea of the current deals available for self-employed mortgage applicants.

Please note that the above rates were accurate at the time of writing but are always subject to change. The best way to find the most up-to-date deals is to speak to a mortgage broker.

How much can you borrow?

The amount you can borrow for a self-employed mortgage will be based on a multiple of your average earnings over a set period. Some banks and building societies will ask for three years’ accounts, others will be happy with two, and a minority will base their calculation on nine to 12 months of trading.

Try our calculator below to get a rough idea of your total borrowing.

How a lender will calculate your maximum borrowing

Not all mortgage providers use the same calculations, but almost all base their calculations on your salary. Most will multiply your average earnings by 4.5, some stretch to 5x your earnings, and a minority will go as high as 6x your earnings under the right circumstances.

Let’s say you’ve been earning an average of £30,000 from freelancing over the last three years, which you can evidence with accounts. Most mortgage providers would cap their lending at £135,000, some at £150,000, and a minority at £180,000.

That said, using a broker could help you maximise your borrowing potential. Perhaps you’ve just had a strong 12 months of trading, but your average income over the last three years is lower when the previous two are factored in. A broker could help you find a lender who offers mortgages based on only one year’s accounts, potentially allowing you to take out a bigger mortgage.

It’s also worth noting that what is classed as declarable income can vary from one mortgage lender to another. Some providers won’t accept bonuses or commissions, for example, while others will let you bulk up your average wage by including varying percentages of supplemental earnings.

What qualifies as self-employed income?

The type of income you can declare for a self-employed mortgage will vary from one lender to the next and can also depend on how you trade. For instance, the type of income a sole trader can declare on their application will differ from somebody who is looking for a company director mortgage.

Here is a breakdown of trading styles and the type of income lenders may accept:

Sole trader

• Net profit (if using accounts)
• Total income received (if using SA302s)

Partnership

• Your share of net profit (if using accounts)
• Your share of total income received (if using SA302s)

Limited company

• Your share of the director’s salary
• Your share of dividends
• Occasionally, lenders can consider net profit if there has been a large business expense or a sum earned that was left in the business and not withdrawn.

Supplemental income lenders might accept

Some lenders will also accept self-employed professionals to declare the following with their main wages and take it into account for affordability:

• Investment Income
• Rental income
• Trust income
• Capital earned overseas
• Capital earned in a foreign currency
• Bursary
• Stipend income
• Personal, workplace, and state pensions
• State benefits

Mortgages for self-employed social media professionals

Social media as a profession (whether employed or self-employed) is a relatively new prospect for lenders to deal with and assess. So, in this regard, getting a mortgage can prove tricky because your track record in the industry may not be substantial enough to provide sufficient proof of income.

However, if you can produce enough documentary evidence – mainly in certified accounts over several years – your chances of getting the mortgage you need should be no different than someone in a more well-known, traditional industry.

When you apply, it should not matter whether you work in a self-employed capacity for YouTube, TikTok, or OnlyFans, next to your ability to prove your earnings—over the long term.

In addition, certain lenders may also want the comfort of seeing further evidence – perhaps in the form of a business plan or financial projection – of how you intend to, at least, maintain your current level of earnings in the future, so you’re able to meet your financial commitments moving forward.

This may mean that particular roles and social media entities are less appealing to a lender than others.

Speak to a broker who specialises in self-employed mortgages

If you’re self-employed and looking for a mortgage, it’s important that you get the right advice, and that means finding a mortgage broker who specialises in customers who trade the same way you do.

The good news is that we work with experts who know which lenders are best positioned to offer favourable rates on self-employed mortgages.

Call 0330 818 7026 or make an enquiry, and we’ll match you with a whole-of-market broker who could save you time, money, and potential disappointment in the long run.