What Are The Mortgage Options For Self-Employed People?

March 7, 2023

It’s becoming increasingly common for people to be self-employed, and the various modes of self-employment are also becoming more diverse. If you fall into this category, you may have heard that it will be more difficult to get a mortgage.

This isn’t necessarily true, but you will have to prove to the lenders that you have a sufficient and reliable income source to meet the monthly repayments. Here are some important points to bear in mind if you are planning to apply for a mortgage in the near future.

The exact mode of your self-employment might have some implications on which are the right lenders to approach, and what criteria you will need to meet. The most common categories of self-employment include freelancers, contract workers, sole traders and partnerships, limited company directors and agency workers.

All of these different types of employment may be assessed using different criteria by lenders, with some taking a more flexible approach than others. Therefore, it is important to seek the advice of a specialist mortgage broker, who will be able to advise you on the mortgage companies who are most likely to accept your application.

A mortgage application when you are self-employed takes some careful planning, and a rejection could be damaging to your credit score. The foremost point to bear in mind is that most lenders will want to see at least two year’s worth of accounts to prove your income is steady and substantial enough to support the mortgage repayments.

Expect to be asked for evidence of your tax returns and SA302, which is the information you provide to HMRC as part of the self-assessment tax return. You will almost certainly be asked to provide bank statements and possibly a signed reference from an accountant as well.

What if you have been self-employed for less than a year?

Getting a mortgage if you have been self-employed for under 12 months is more challenging, but it may still be possible if you approach a lender who specialises in self-employed mortgages. Your options will be more limited, and you may be asked for a higher deposit of at least 10%, and may have a higher than average interest rate.

The lender is also likely to look at your monthly income and outgoings to assess how well placed you are to afford the repayments, and how much of a risk you represent to them.

Can you get a self-employed mortgage with bad credit?

If you have an adverse credit history, then getting a self-employed mortgage will be more challenging. Some lenders may still consider your application, so it’s worth contacting an experienced mortgage broker for some advice.

The lender will look at the severity of your credit issues, how long ago they occurred, and what steps you have taken to improve your financial situation since then.

If you are looking for adverse credit mortgage brokers, please contact us today.

Your home may be repossessed if you do not keep up with your mortgage repayments.

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.

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