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Self-employed mortgages

Finding the right mortgage that meets your needs

Self-employed mortgages

High street lenders tend not to offer mortgages to the self-employed, contractors and freelancers without considerable paperwork and delay, so finding the right one for your circumstances can be daunting.

Lenders will look at your finances more closely, typically to minimise risk, and often ask for at least three years of accounts and tax returns. Your income, outgoings and overall affordability are closely examined, which can make it tougher to get your mortgage approved.

The interest rate is based on the size of your deposit and your affordability, and just as for an employee, you’ll receive the best rates if:

  • Your finances are in order
  • You are on the electoral roll
  • You can afford to pay back any credit cards or loans
  • You are free from bankruptcies, County Court Judgements (CCJS) and defaulted payments

But lenders will also pay close attention to your:

  • Business structure – sole trader, limited company or partnership
  • Income
  • Salary or dividends
  • Net profit


Assessing fluctuating incomes

Lenders usually assess fluctuating incomes on an average of the last three financial years (6 April to 5 April). But they may base your affordability on the most recent year if your net profit is significantly lower.

Lenders look at your net profit when deciding if or how much to loan you. The lower your net profit, the less you will be able to borrow. The reverse of this is also true, so the higher your net profit, the more you can borrow.

Ability to get a loan

Similarly, paying yourself minimal dividends from a new limited company will impact on your ability to get a loan.

Lenders now have very strict criteria when they work out what you can afford. Some ask to see copies of your bank statements for the past six months to a year, whereas others require the last two or three years.

Verified by an accountant

Your company or freelance accounts must be verified by an accountant. Lenders do not accept them without this. Outstanding credit like personal loans, car finance agreements and credit card debt will lower the amount a lender gives you.

Many base their assessments on average annual living costs and your disposable income above that figure. They may also take into account business assets, savings and investments, and ask you to put these down as part of your deposit.

Steady stream of income

The longer you have been self-employed, the better your chances of obtaining a mortgage. Precise financial records will help your case. Show you have a steady stream of income and do not live beyond your means.

You’ll typically need a deposit of at least 5% giving you access to 95% loan-to-value (LTV) mortgages. As with all mortgage applicants, the bigger your deposit, the lower the interest rates.

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the first step?

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Call: 01937 837707