How to get a mortgage if you're self-employed

November 28, 2023

If you work for yourself, you might think that getting a mortgage is more difficult than if you were employed by a company. But don’t worry, being self-employed doesn’t mean you can’t buy your dream home.

We will advise you on what lenders are looking for and prepare your application on your behalf keeping things simple.

What is a self-employed mortgage?

There is no such thing as a self-employed mortgage. You will be applying for the same mortgage products as homebuyers who are employed by companies.

The difference is that lenders will assess your income differently, depending on how you run your business and how long you have been self-employed.

How do lenders assess your income?

Lenders want to see that you have a reliable and stable income that can cover your mortgage repayments. They will look at your accounts, tax returns, bank statements and business projections to get a picture of your financial situation.

The way lenders calculate your income will depend on how you are self-employed:

If you are a sole trader

You will need to provide your SA302 form, which shows your income from self-assessment.

Lenders will usually take the average of your last two or three years of income, but some may only consider the most recent year.

If you are a partner in a business

You will need to provide your SA302 form and a partnership agreement, which shows your share of the profits.

Lenders will usually take the average of your last two or three years of income, but some may only consider the most recent year.

If you are a director of a limited company

You will need to provide your company accounts, tax returns and payslips, which show your salary and dividends.

Lenders will usually take the average of your last two or three years of income, but some may only consider the most recent year.

How long do you need to be self-employed?

Most lenders will require you to have at least two years of accounts or tax returns to prove your income.

However, some lenders may accept one year of accounts or tax returns, especially if you have a good credit history and a large deposit.

Some lenders may also consider your previous employment history, if you are in the same line of work, providing evidence of your income to make sure you can afford the repayments.

How to boost your chances of getting a mortgage

Being self-employed doesn’t have to stop you from getting a mortgage, but you may need to do some extra work to make your application more attractive to lenders.

Here are some tips to help you:

How to boost your chances of getting a mortgage

Being self-employed doesn’t have to stop you from getting a mortgage, but you may need to do some extra work to make your application more attractive to lenders.

Here are some tips to help you:

Save a large deposit

The bigger your deposit, the lower your loan-to-value (LTV) ratio, which is the percentage of the property value that you are borrowing.

A lower LTV means a lower risk for the lender and a better chance of getting a lower interest rate.

Improve your credit score

Your credit score is a measure of your financial reliability, based on your borrowing and repayment history.

A higher credit score means a better chance of getting approved for a mortgage and a lower interest rate.

You can improve your credit score by paying your bills on time, keeping your credit card balances low, and checking your credit report for errors.

Keep your accounts up to date

Lenders will want to see your latest accounts or tax returns, so make sure they are accurate and complete.

You may also want to hire a certified or chartered accountant to prepare your accounts and verify your income.

Reduce your debts

Lenders will look at your debt-to-income (DTI) ratio, which is the percentage of your income that goes towards paying your debts.

A lower DTI means a higher disposable income, which means you can afford higher mortgage repayments.

You can reduce your DTI by paying off your existing debts, such as credit cards, loans and overdrafts, or consolidating them into a lower-interest loan.

Use a mortgage broker

One of the best ways to get a mortgage when you are self-employed is to use a mortgage broker. We specialise in self-employed mortgages and know our lender’s criteria.

We have access to 72 lenders and a wide range of products, some may not be available on the high street or online.

We can help you find the most suitable mortgage deal for your situation, whether you are a sole trader, a partner or a director of a limited company.

You don’t have to do the comparing lenders or application yourself, we will do all the hard work for you.