I’m self-employed. Can I get a mortgage?
In short, yes! There are lenders that have products that are available for the self-employed market. At Yomo Finance we’ve worked with many self-employed homeowners and first time buyers to find them the best deal for their circumstances. Book an appointment with our team in Aylesford today to discuss the products available.
Self-employed mortgages with one years’ accounts
They are not widely available, but it is certainly possible to get a mortgage with just one year of accounting history. Whilst most mortgage lenders will expect self-employed mortgage applicants to be able to show three years' worth of accounts, some specialist lenders will be able to help you. You should be aware that due to minimal lenders offering this type of mortgage, the interest rates on your mortgage are likely to be less competitive. As high street lenders won’t usually be able to consider your application, it’s best to speak to mortgage brokers, such as Yomo Finance, to find out which lenders are more accepting of your situation.
How do I prove my income with one years’ accounts?
For self-employed mortgage applicants, mortgage lenders will usually take an average of their earnings over a period of two to three years, to mitigate some of the risk, given that self-employed income is still considered less stable than that of employed people.
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Where you only have one year of accounts available, additional proof that your business will support your income in the longer-term is likely to be requested. Business plans and projected future income can usually back up your application, alongside business bank statements The self-employed business activities you perform will have an impact on how your income is used by the mortgage lender.
How you can prove your proof of income for your first year of business is as follows:
Sole traders/
freelancers
Your personal income will be used to calculate your mortgage and you will need to provide an SA302 form for the year and certified accounts (at least 12 months' worth, but the more the better).
Limited company directors
Your personal salary and dividends will be used, although rarely net profits are also considered. To prove this you will need your latest years finalised accounts, certified by a qualified accountant and an SA302 for the same period as well as business bank statements
Partnerships
To use your income derived from a partnership, you must own at least 25%. Your share of the net profits will be used in the mortgage calculation. To prove this, you will need an SA302 form for the year.
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How much can I borrow?A typical mortgage applicant can expect to borrow four and half times their annual income. This should not be affected by your employment type unless your income is low or you have a poor credit score.
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What deposit will I need?There is no specific deposit requirement needed by self-employed applicants and the minimum deposit usually needed for a standard residential mortgage is 10%. That being said, with a short trading history, you will increase your chances of securing a mortgage if you are able to offer more than the minimum deposit requirement. This can also give you access to more competitive mortgage rates.
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Do I have access to the Help to Buy scheme if I’m self-employed with one years’ accounts?All of the government home ownership schemes were created to help those applicants who would struggle to get a mortgage under normal circumstances. This extends to self-employed applicants and, although there will certainly be less availability if you have fewer years of accounts available, Yomo Finance will be able to help you. All of the government home ownership schemes were created to help those applicants who would struggle to get a mortgage under normal circumstances. This extends to self-employed applicants and, although there will certainly be less availability if you have fewer years of accounts available, Yomo Finance will be able to help you.
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What documentation is needed for a self-employed mortgage application?Tax returns, business accounts and possibly a reference from an accountant. This all depends on whether you are a sole trader, a director of a Limited Company or are in a partnership.
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How many years of accounts do I need to provide?Usually, two to three years of accounts. However, you can get a mortgage with one year's books.
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Can I get a mortgage if I am a contractor or freelancer?Yes, but you may need to provide more evidence of income stability. Typically you would need 12 months history.
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How do lenders assess self-employed income?They typically look at your average income over the past two to three years.
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What can I do to improve my chances of getting a mortgage as a self-employed individual?Keep thorough records, pay your taxes on time and maintain a good credit score. You should also limit the amount of expenses you put through in order to maximise your income.
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Are there specific lenders that specialise in self-employed mortgages?Yes, some lenders are more flexible with self-employed applicants.
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How does fluctuating income affect my mortgage application?Lenders prefer stable and predictable income but may consider averages.
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What is the impact of a limited company structure on getting a mortgage?Your income may be assessed differently, focusing on salary and dividends.
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Are interest rates higher for self-employed mortgages?They can be, depending on the perceived risk by the lender but most do not charge higher interest rates for self-employed applicants.
