Getting A Mortgage Self Employed

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Home » Mortgages » Getting a Mortgage Self Employed

Getting A Mortgage Self Employed

By the start of 2020, there were over five million self-employed people in the United Kingdom. In 2000, there were 3.2 million, so there has been considerable uptake in the proportion of self-employed people. This group represents 15.3% of the UK employment market *.

Therefore, companies cannot afford to overlook the self-employed sector, which is true for the mortgage market. Getting a mortgage while being self-employed has been challenging, but it isn’t an impossible task. Also, an increasing range of self-employed mortgage products is available to choose from, and arranging a mortgage while you are self-employed is a more straightforward task.

Therefore, the full range of self-employed mortgage UK options should offer confidence to any professional looking to buy their first home, arrange a Remortgage, Secured Loan or a Buy to Let property.

What counts as being self-employed?

Mortgage lenders will classify a person as self-employed if they own over 20% to 25% of a business. This includes those classed as a sole trader, a company director, partnership, a freelancer or contractor.

Freelancer Mortgages & Contractor Mortgages

With studies indicating close to 73% ** of freelancers believing their employment status might jeopardise their chances of arranging a mortgage, there is a need for specialist freelancer mortgages. The same study suggests 21% of freelancers have considered their employment status due to concerns over arranging a Mortgage.

Knowing that additional challenges involved with the mortgage application process for these professionals is a good starting point. It might sound like a daunting task, but when you are aware of the challenges you face, it is easier to overcome them.

How do you get a self-employed mortgage?

A self-employed person looking for a mortgage has technically the same range of mortgages to choose from as any applicant in more conventional employment. In applying, you need to pass the affordability test imposed by the lender.

However, the challenge comes with a self-employed person having no employer to vouch for their income. Therefore, self-employed professionals must offer a greater level of evidence of their income than people employed by a business.

There have been significant changes in the UK mortgage market since the Mortgage Market Review in 2014. Lenders need to be convinced of a client’s ability to pay the mortgage short and long term before committing to the loan.

The first step in getting a self employed mortgage is to speak with a qualified and experienced self employed mortgage advisor.

What does a self-employed person need to provide when applying for a mortgage?

When applying for a mortgage, a self-employed professional should provide:

  • Personal Tax Calculations & Tax Overview (from HMRC).
  • Company Accounts.
  • Business Bank Statements.
  • Evidence of existing and upcoming contracts – if you’re a contractor.
  • Work History (CV) – if you’re a contractor.

Most lenders will prefer accounts which a qualified, chartered accountant has prepared. This provides a greater degree of reliability for the lender. Most lenders will likely focus on the average profit earned in recent years, however some will use the latest years figures.

Any self-employed professional who only has a year’s worth of accounts (or less), will find it harder to arrange a mortgage, but again, it is not impossible.

Mortgages for Self Employed with 1 years accounts

If you can only provide one years’ worth of accounts, you should expect a lender to ask you many questions regarding your experience and career. If you can show you have considerable experience in your profession and your income level over the years, you will build a compelling application.

Also, if you are able to provide a larger deposit and have a reliable credit history, you will be more likely to obtain a mortgage while being self-employed.

Other documents required by self-employed professionals when applying for a mortgage include:

  • Driving licence & Passport.
  • Last 3 months personal bank statements.

A mortgage lender will examine your bank statements to ascertain what you spend on bills, and what your other costs are. This helps them determine whether you can afford monthly mortgage payments.

Mortgage lenders are likely to ask about; household bills, travel and commuting costs, childcare costs, socialising, hobbies, credit card payments, loan repayments, finance agreements and any other ongoing bills.

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

It should be noted mortgages for self-employed people are the same as standard mortgages.

The factors which shape the mortgage offer available to self-employed people are the same factors that influence conventional mortgages. Therefore, self-employed professionals looking to arrange a mortgage should save as large a deposit as possible, and they should look to improve their credit rating.

However, if these steps don’t provide self-employed people with the mortgage they are looking for, it is vital to turn to specialist lenders instead of the leading high street lenders.

With so many different demographics of people looking for a mortgage, it is useful to get specialist help. A self-employed mortgage broker is experienced in assisting self-employed people, and these professionals deal with lenders who offer tailored mortgage products to this group.

Working with a specialist saves time and enhances the chances of success when applying for a mortgage.

While any mortgage broker might be able to help you find a suitable arrangement, a self-employed mortgage broker is better positioned to assist you. This tailored support will speed up the process while enhancing the likelihood of finding the right lender and mortgage offer.

I have bad credit registered – Can you help?

If you need a bad credit self employed mortgage as you have registered on your credit profile:

  • Missed Payments, Defaults.
  • County Court Judgements.
  • Satisfied Bankruptcy & Satisfied IVA.

We can help. We have specialist lenders who can help clients with low credit scores and with the above mentioned credit marks recorded. More underwriting will be involved and the adviser will want to know when this bad credit took place, why it happened, the debt amount and if you have managed to resolve this since. These can also be known as Subprime Mortgages. Additionally due to having bad credit recorded you may need to have a larger deposit/equity in place.

There are Bad Credit Mortgage Lenders that are willing to help first time buyers become a home owners and use schemes such as Help to Buy, Right to Buy and Shared Ownership.

How to explore your self-employed mortgage options with The Money Hub

Call The Money Hub Limited on 0203 725 5830 and speak to a highly dedicated Self Employed Mortgage Advisor or you can complete an enquiry form which will allow you to schedule a call time.

It is always good practise to have your credit report available from either Experian, Equifax or checkmyfile as the adviser will want to review this.

DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.



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Self Employed Mortgage FAQ’s

Most high street lenders require you to be self employed for 2-3 years, however there are a few high street lenders that are willing to accept 1 year’s accounts plus there are more specialist lenders available through mortgage brokers who can help.

You will be required to provide these documents:

  • Accounts.
  • Tax Calculations & Tax Overviews.
  • Business Bank Statements
  • Current Contract Details (if you are a contractor).

Related Information

Bad Credit Mortgages

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