Self employed and want to buy a house? It is possible to get a mortgage when you’re self-employed and most lenders are quite supportive and should offer the same rates as someone in a permanent full time job. However, as you do not have an employer to confirm your income, you will need evidence that you have a stable income and you may be offered more expensive rates by some lenders. Here’s an overview of what you need to know.
Self employed and wanting a mortgage
You are considered to be self-employed by a mortgage lender if you own more than 20-25% of a business from which you earn your main income. In the past, you could apply for a self-certification mortgage, however, you now need to share evidence of your income. This means that you should have access to the same mortgage deals as someone on a fixed salary as you have to pass the same affordability tests. However, being your own employer can make this harder.
You may be considered self-employed by a lender if:
- You own shares in a business which forms your main income
- You’re a contractor or freelancer
- You’re acting as a director of a limited company
- You’re a partner in a partnership or limited company
The evidence you are likely to need to apply for a mortgage
Collating the evidence needed by a lender to prove your income is often the most difficult or time consuming part of applying for a mortgage if you’re self employed. Self-employment often means fluctuating income and lenders like to see consistency!
Most lenders like to see the following accounts as proof of income, however, this is often the minimum requirements – you may be asked to share accounts for the past three years as well as:
- Tax calculations and tax year overview (SA302) – These show earnings and tax paid. These should be on your self-assessment tax return
- Evidence of upcoming contracts – this may be helpful
- Salary and dividend payments – If you are the director of a limited company, lenders will need to see how much you are paying yourself.
You’ll also need the following:
- Proof of ID
- Proof of address
- Personal tax returns
- Bank statements
What you can do to support your application
If you are self-employed then providing a large deposit will definitely help – this is likely to be higher than the usual 5% deposit. You can also take the following actions to help your application:
- Check your credit score and improve
- Make sure you’re on the electoral roll
- Do NOT take out any payday loans
- Be careful with your credit card – don’t spend to the maximum and pay off more than the minimum repayment amount each month.
Who can help you get a mortgage?
A mortgage adviser can help you with getting a mortgage and sourcing the best rates for your situation.
A specialist broker may help you find a mortgage if your income fluctuates widely or if you haven’t been trading for long. They will have experience of negotiating with banks and building societies to find one who is willing to offer a good rate to a self-employed borrower.
Your accountant can help you collate all the information you need, however, you will probably find this in your self assessment tax returns and company accounts.
Frequently Asked Questions
Q. How much do I need to earn to get a mortgage if I’m self-employed?
It depends on the amount you want to borrow and your credit rating. You will also need, on average, a 5-10% deposit although a bigger deposit is often better.
Q. Can we get a mortgage together as my partner is self-employed?
Yes of course but they will need proof of income and of future earnings to ensure that they can make regular mortgage payments.
Q. Does a self-employed person pay higher interest rates on a mortgage?
Lenders say: not necessarily as long as you have a regular, steady income and a good credit rating. Although every lender is different and you may need to research the best lender to suit your situation.
HB Accountants are here to help you through it all – feel free to give the team a call on 01992 444466.
The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above
Read latest updates below or click here for more
- Why a budget helps you to focus on business growth
Are you looking for clarity over the future direction of your business? Do you want to know the actions you should take in order to grow your business? Then consider taking time to create a budget for your business. This blog will share the benefits of creating a budget – also known as an operating … Continue reading - How a SME Owner Can Create More Time
SME owners and managers – are you part of the one in five small and medium-size enterprise managers that work on average an additional 3 hours a day on a regular basis? Or one of the 33% that claim that there just aren’t enough minutes in a day to get everything completed? (The Independent study … Continue reading - A New Academic Year for our Student in Zambia
As the new academic year unfolds in Zambia, we are delighted to share an update about our sponsored student, Getrude. Currently in her second year at Chalimbana University, Gertrude is studying Business Administration in Accounting and Finance. We sponsor Gertrude through the African Impact Foundation, a charity that equips young people with education and skills … Continue reading - Benefits in Kind via the payroll
From April 2027, Benefits in Kind (BIK) payments will need to be paid and recorded via payroll each month. Businesses need to prepare for this change. - Getting a mortgage when you’re self employed
Self employed and want to buy a house? It is possible to get a mortgage when you’re self-employed and most lenders are quite supportive and should offer the same rates as someone in a permanent full time job. However, as you do not have an employer to confirm your income, you will need evidence that … Continue reading - HB Accountants Leads Installation of Life-Saving Defibrillator in Rye House, Hoddesdon
A potentially life-saving public access defibrillator has been installed in the Rye House area of Hoddesdon, made possible by local business HB Accountants, in partnership with local charity, Hearts for Herts, and a generous donation from Plumpton House landlord Clive Martin. HB Accountants’ fundraising had personal inspiration driving their mission.
