Mortgages for the self-employed

Last updated: March 2021 | 1 min read

Are you currently working for yourself and wonder how you can climb the property ladder? Here is what you need to know if you are self-employed and need a mortgage.

Vital stats relating to self-employed mortgages

  • The amount of self-employed people is almost twice as much as compared to 40 years ago.
  • Only 10% of loans have been offered to self-employed.
  • Latest data gathered and released by Trussle shows that 76% of self-employed people are likely to get a mortgage offer. This is lower as compared to 86% for retired people and 89% for those with bad credit.
  • Getting a mortgage if you are self-employed is more complicated. However, this article will cut it out for you.

When will you be considered to be self-employed?

  • You will be considered as self-employed if you are a sole trader or have 20% or more stake in a company
  • If you are Sub-contractor with income from multiple contracts, you will be considered to be self-employed
  • If you are a partner in a business
  • If you are a franchise owner
  • If a limited company employs you and they reward you with dividends and share profit

Declared income as self-employed

It would serve you best if your declared earnings are high. While you will have to pay more tax, a mortgage lender will likely accept your mortgage application if your declared income is higher rather than as small as possible. Further, the higher your declared earnings are, the more you will be able to borrow.

Which documents do you need if you need a self-employed mortgage?

  • Bank statements – You will need your bank statements, debt repayment details, details of the inflow and outflow of money.
  • Net profit – If you are a sole trader or in a partnership agreement, you may be asked to show net profit or share of net profit. If you are the director of a limited company, you will be asked to provide details of your salary and dividends.
  • Contracts – If you are a contractor, you will need the paperwork to show fixed earnings.
  • SA302 form – this form declared your income and profit.
  • Tax year overviews – this is produced by accountants. Lenders will want the figure for tax due to match up.

What else should you know?

It will be rarely easy if you want to get a mortgage when you are self-employed. However, if you plan it out, you can quickly get a mortgage.

A mortgage broker can provide valuable advice as they are aware of the products available in the market and various lenders' lending criteria.

It would help if you also talked to other self-employed people who have taken a mortgage.

Click here to find out the affordable homeownership government schemes to help you buy a home.

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