Being your own boss is great, but when it comes to getting a mortgage, it might feel like you’re navigating a maze. The good news? It’s absolutely possible to get a self employed mortgage—you just need the right approach. In this guide, we’ll break down everything you need to know, from the documents you’ll need to helpful tools like self employed mortgage calculators. Let’s dive in!
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How Long Do I Need to Be Self-Employed Before Applying for a Mortgage?
Most lenders require you to have been self-employed for two to three years to prove that your income is stable enough to afford mortgage repayments. That’s because lenders use your income history to assess risk when considering you for a self employed mortgage.
But don’t worry—if you’ve been self-employed for less than two years, you might still qualify. Here’s how:
- If you transitioned from a full-time job to self-employment, your past pay slips may help.
- A strong credit score and a sizable deposit (20% or more) can work in your favor.
- Specialist lenders or a self-employed mortgage broker can help find options tailored to your situation.
What Do I Need for a Self Employed Mortgage?
Here’s a key point: there’s no such thing as a “self-employed mortgage.” You’ll apply for the same mortgage as anyone else; the difference lies in how you prove your income to qualify for a mortgage for the self employed.
Standard Documents Required:
- Proof of Identity: Passport or driver’s license.
- Proof of Address: Recent utility bills or official correspondence.
- Bank Statements: Usually from the last 3–6 months.
Additional Documents for the Self-Employed:
- Business Accounts: Typically, accounts for the last two or three years prepared by a qualified accountant.
- SA302 Forms and Tax Overviews: These are provided by HMRC and show your declared income.
- Proof of Upcoming Work: Contracts or invoices to show ongoing income stability.
For sole traders, lenders will assess your net profit. If you’re a company director, they’ll usually consider salary and dividends or retained profits, depending on the lender’s criteria.
Can I Get a Mortgage with a Self-Employed Partner?
Yes, you can apply for a joint self employed mortgage with a partner. A joint mortgage works similarly to a sole mortgage, except that both applicants are responsible for the repayments.
Things to Keep in Mind:
- If your self-employed partner has irregular income or is temporarily out of work, you may need to cover the full payment.
- Lenders will consider the combined income, so if one partner’s financial situation is unstable, it could impact your chances of approval.
Tip: Ensure you can manage the repayments comfortably, even if one partner’s income decreases.
How Can I Improve My Chances of Getting a Mortgage When Self-Employed?
Getting a mortgage when self employed can be tricky, but these steps can boost your chances:
1. Save a Larger Deposit
A larger deposit (at least 15-20% of the property price) reduces the lender’s risk and increases your chances of approval.
2. Consult a Self-Employed Mortgage Broker
A self-employed mortgage broker specializes in finding lenders that cater to self-employed individuals. They can also help with tricky situations like limited accounts or irregular income.
3. Use a Self Employed Mortgage Calculator
Before applying, use a self employed mortgage calculator to estimate how much you can borrow. These calculators account for your unique income situation and help you plan your finances.
4. Regularly Check Your Credit Score
A higher credit score shows lenders that you’re a responsible borrower. Use platforms like Experian or Equifax to check your credit report, and dispute any errors you find.
5. Organize Your Finances
Keep your accounts up to date, separate personal and business expenses, and pay off outstanding debts. This makes your financial situation more appealing to lenders.
6. Get on the Electoral Register
Being on the electoral register can improve your credit score, which lenders use to assess your application.
Why Use a Self Employed Mortgage Calculator?
A self employed mortgage calculator is a powerful tool that gives you a clear picture of your borrowing power and repayment obligations.
How It Helps:
- Estimates how much you can borrow based on your income and deposit.
- Calculates your monthly repayments, including interest rates.
- Helps you compare deals across different lenders.
Pro Tip: Use calculators specifically designed for self-employed individuals, as they account for variable income and irregular cash flow.
What If You’re a Small Business Owner?
Small business owners often face additional scrutiny when applying for mortgages for self employed individuals. Lenders may ask for:
- Detailed business accounts, including profit-and-loss statements.
- Evidence of long-term contracts or recurring clients.
- Proof that your business is stable and profitable.
If your business is new, consider working with a self employed mortgage broker who understands how to present your case to lenders effectively.
How Can I Improve My Chances of Getting a Mortgage When Self-Employed?
Getting a mortgage when self employed can be tricky, but these steps can boost your chances:
1. Save a Larger Deposit
A larger deposit (at least 15-20% of the property price) reduces the lender’s risk and increases your chances of approval.
2. Consult a Self-Employed Mortgage Broker
A self-employed mortgage broker specializes in finding lenders that cater to self-employed individuals. They can also help with tricky situations like limited accounts or irregular income.
3. Use a Self Employed Mortgage Calculator
Before applying, use a self employed mortgage calculator to estimate how much you can borrow. These calculators account for your unique income situation and help you plan your finances.
4. Regularly Check Your Credit Score
A higher credit score shows lenders that you’re a responsible borrower. Use platforms like Experian or Equifax to check your credit report, and dispute any errors you find.
5. Organize Your Finances
Keep your accounts up to date, separate personal and business expenses, and pay off outstanding debts. This makes your financial situation more appealing to lenders.
6. Get on the Electoral Register
Being on the electoral register can improve your credit score, which lenders use to assess your application.
Why Use a Self Employed Mortgage Calculator?
A self employed mortgage calculator is a powerful tool that gives you a clear picture of your borrowing power and repayment obligations.
How It Helps:
- Estimates how much you can borrow based on your income and deposit.
- Calculates your monthly repayments, including interest rates.
- Helps you compare deals across different lenders.
Pro Tip: Use calculators specifically designed for self-employed individuals, as they account for variable income and irregular cash flow.
What If You’re a Small Business Owner?
Small business owners often face additional scrutiny when applying for mortgages for self employed individuals. Lenders may ask for:
- Detailed business accounts, including profit-and-loss statements.
- Evidence of long-term contracts or recurring clients.
- Proof that your business is stable and profitable.
If your business is new, consider working with a self employed mortgage broker who understands how to present your case to lenders effectively.
FAQs About Self Employed Mortgages
Can I get a mortgage with just one year of self-employment?
It’s possible, but more difficult. Lenders will want to see evidence of steady income, such as previous pay slips or contracts for upcoming work.
Do I need an accountant to apply for a mortgage?
While it’s not mandatory, having professionally prepared accounts can significantly strengthen your application.
Are interest rates higher for self-employed mortgages?
Not necessarily. If you have a strong financial profile, you may qualify for the same rates as employed applicants.
Should I apply alone or with a partner?
If your partner has a stable income, applying jointly can improve your chances. However, remember that you’ll both be equally responsible for repayments.
Key Takeaways
Getting a self employed mortgage may require extra effort, but it’s far from impossible. Here’s a quick recap:
- Most lenders require 2–3 years of accounts, but there are exceptions.
- Tools like self employed mortgage calculators can help you plan your budget.
- Consulting a self-employed mortgage broker can connect you with specialist lenders.
- Keep your financial records up to date and check your credit score regularly.
Ready to take the next step? Research your options, gather your documents, and speak with a broker to simplify the process. With the right preparation, securing a mortgage for the self employed is absolutely achievable!