Self-Employed Mortgages Explained

Self employed worker at home

When it comes to getting on the property ladder and buying a house for the first time, there are many factors and considerations you need to take into account and it can be a tricky subject to navigate, regardless of your employment status.

The mortgage rules around being self-employed can often be a little tricky to understand, and if you are self-employed, you may be wondering if you can even get a mortgage at all.

In our guide to self-employed mortgages, we provide our top self-employed mortgage advice to help you navigate the self-employed mortgage requirements, as well as how to increase your chances of getting a mortgage for self-employed and we answer questions such as “how many years accounts do you need for a self-employed mortgage?”.

Is getting a mortgage harder when you're self-employed?

While it’s certainly possible to obtain a mortgage if you’re self-employed, it can prove to be a little trickier than if you were in traditional employment, for example, as you have to prove that you have a reliable income so that you’re able to meet your mortgage repayments.

How to get a mortgage when self-employed

If you’re self-employed and looking to obtain a mortgage, then you’ll have to apply for a mortgage through a lender just like everyone else. You should in theory have exactly the same access to all types of mortgages as everyone else, the only difference is that you might have to go the extra mile to prove that you earn a reliable and sustainable income. 

Before lenders will accept your mortgage application, you will have to provide much more evidence of your income than those in traditional means of employment, but that doesn’t mean to say that you won’t be accepted.

How much money can a self-employed worker borrow for a mortgage?

There is no restriction on how much a self-employed person can borrow for a mortgage as they will have the same access to a variety of mortgages just like everyone else.

However, the restriction as to how much they can borrow may be impacted by how much they earn, as well as the usual mortgage lender criteria such as their credit score.

In theory, though, they can borrow the same as people in full-time employment.

How many years do you have to be self-employed to get a mortgage?

While the number of years that you have to be self-employed to get a mortgage differs between different mortgage providers, most lenders will ask for a minimum of at least two years’ accounts, if not three.

What do mortgage lenders look for when a self-employed person applies?

When applying for a mortgage as a self-employed person, there are several things you will need to provide when making your application, including (but not limited to) the following:

  • At least two (but often more) years’ accounts.
  • SA302 forms or a tax year overview (which you can obtain from HMRC) for the past two or three years.
  • If you’re a company director, you will need to provide evidence of dividend payments or retained profits.
  • If you’re a contractor, you will need to provide evidence of any upcoming contracts.

You will also likely need to provide proof of identity, such as your driving licence, passport, household bills and utilities. Some mortgage lenders may also ask for more in-depth details about the kind of things you spend your income on such as childcare, travel, household bills, credit card payments, loan repayments, car finance bills and more.

You might like: All you need to know about getting accepted for loans

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

Self-employed people are usually able to obtain a mortgage from the same choice of lenders as someone who works in traditional employment, so they won’t usually have to pay higher mortgage rates.

However, as the barriers to entry may be slightly higher due to the need to provide more detailed evidence of your income of at least two to three years, it can be a little more time-consuming to find a mortgage lender that’s right for you.

Providing that you can put down a decent deposit and you’ve got a good credit score, you should be able to qualify for exactly the same mortgage rates as someone who isn’t self-employed.

How much deposit do you need for a house if you are self-employed?

The deposit that you need for a mortgage if you’re self-employed shouldn’t be any more than it is for people who are traditionally employed.

Depending on the mortgage lender, you will usually need to have a deposit of 10% at the very minimum, but most lenders will require you to have at least 20%-25%. Of course, the more deposit you have, the more likely you are to be accepted for a better mortgage as you’re proving that you’re a safe bet for lenders.

How to find the best self-employed mortgage lenders

The number one best way to find the best mortgage rates as a self-employed person is to shop around and compare quotes from different providers. You can use comparison tools where you can search for different mortgage lenders and then you can put in the amount of money that you want to borrow, the duration of the loan term and the property value and then you’ll be able to compare quotes from different providers.

How to increase your chances of being accepted for a self-employed mortgage

As we mentioned above, getting a mortgage if you’re self-employed shouldn’t be any different to getting one if you’re not self-employed. However, there are some things you can do to increase your chances of being accepted:

  • Try to save as much money as possible for your deposit.
  • Ensure that the last two to three years of your business accounts look good.
  • Avoid making any mistakes on your application form.
  • Check the status of your credit score and credit history before you apply to see if you need to improve it.
  • Register on the electoral roll.
  • Seek advice from a mortgage broker or specialist who can help you with different lenders and your applications.

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