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Can self-employed get a mortgage?

  • Self-employed people often hear that it will be hard for them to get a mortgage.
  • With various types of self-employment and income assessment, there are lots of options available.
  • With our experience in self-employed mortgages, we can help you own your dream home.
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Self-employed mortgages

Getting a mortgage when self-employed 

The number of people who are self-employed as sole traders, freelancers, Ltd company directors, LLP partners or contractors is increasing. Yet, if you are self-employed, you may still find it difficult to secure a mortgage.

On one hand, your self-employed accounts are tax efficient, on the other hand, they may not reflect how much disposable income you really have.

You may have heard that you would need at least 3 years accounts and a huge deposit to secure a mortgage, so feel that you won’t go far with only 1-year self-employed history and 5-10% deposit.

In addition, as a freelancer, you may not have a regular income or as an LLP partner (e.g. doctors, solicitors), you may not have much control over the accounts.

The good news is that many lenders recognise how self-employed people work and can offer flexible self-employed mortgage criteria or even bespoke mortgage deals. 

Self-employed mortgage criteria

Although the self-certification mortgage, which once permitted self-employed people to obtain a loan without needing to prove their income, has been scrapped, this does not make borrowing any less viable for the self-employed. Indeed, provided you meet certain income criteria and can provide proof of your earnings, the chances of being approved for a mortgage are no less than someone employed by an organisation.

Every mortgage lender assesses your income differently. In addition, there may be a difference between the amount you could borrow by doing the mortgage directly with the lender or through a broker.

You CAN possibly get a mortgage, if

  • You have only been trading for 1 year;
  • Your latest year shows lower income than the previous year(s);
  • You only took out the minimum salary and dividends to minimise your tax liability;
  • Your income hasn’t been consistent during the year (e.g. by being a freelancer);
  • You have recently changed from being a sole trader to a Ltd company director;
  • You have recently become a partner in a solicitor firm after being their employee;
  • Your contract is on zero-hour or commission only basis;
  • As a contractor, you have been working on an hourly or daily rate basis for less than a year

However, in order to answer your question “How much can I borrow?”, we will need to look at your outgoings, credit history and other aspects as well.

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How many years accounts do I need for a mortgage?

Some mortgage lenders assess your self-employed income as an average of the last 2 or 3 years, others just take the latest year income. More importantly, you can also get a self-employed mortgage with 1-year accounts from certain lenders.

Proof of income for self-employed

The proof of income depends on your self-employment type and the chosen lender’s self-employed mortgage criteria. It may be self-employed accounts, tax calculation and tax overview, accountant certificate or even your contract(s).

However, lenders do not normally accept purchase orders, tax returns, abbreviated company accounts or business bank statements as proof of income for self-employed.

You may remember being asked for SA302s and waiting for them in the post for 2 weeks after calling up HMRC. The SA302 has been renamed to tax calculation and you (or your accountant) can download it from HMRC’s website, which is more convenient.

A new form is called tax overview, which shows your tax liability per year and whether it has been paid. You can download the tax overview document from HMRC’s website. When lenders ask for tax calculations, they normally ask for the corresponding tax overviews as well.

How can we help you?

There are around 100 mortgage lenders on the market currently, many of whom are only accessible via brokers or offer different terms via brokers. It is our job to know or check how they assess your income and how their individual mortgage calculators work in order to get you the required mortgage.

We have the tools, the knowledge, the contacts and the experience to find you the most suitable lenders and deals based on your circumstances.

If you are self-employed and have been asked for 3 years accounts and a hefty deposit, perhaps it is time to give us a call for a free no-obligation assessment of your situation. If others said “no”, we may surprise you regarding how much you could borrow.

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Looking for a self-employed mortgage calculator?

Our “How much can I borrow?” calculator below has a self-employed section that takes into account your self-employed income. It is a good starting point to get an idea of your borrowing potential.

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