Self-Employed Mortgage Advice
If you’re self-employed you might feel a little anxious about getting a mortgage. Don’t worry, it’s perfectly possible to be your own boss and get a mortgage. You may just need to provide a little more information to your mortgage lender to show that you can keep up your monthly repayments.
It’s important to note that there’s no such thing as a ‘self-employed mortgage’ – you’ll be applying for the same mortgage as anyone else.
How Do I Evidence Income?
Unlike employed applicants that provide payslips to prove, lenders look at SA302's (tax returns) and/or company accounts if you have set up a Ltd company. Generally, lenders will look at the lst two years and take averages, but there are lenders that will offer mortgages to those with only one years SA302 or accounts. If your business is growing, there are also lenders that will take the latest year of two, but this will be lender specific and need additional underwriting, so it's best to speak to a broker first.
1 Years Accounts/Tax Returns
If you are newly self-employed or have a new company, there are some lenders that will accept 1 year's tax information and/or company accounts. You may be restricted to a lower loan-to-value, but this all depends on the market at the time. The best thing to do is arrange a call, and we can go through the details and explain your options.
2 Years Accounts/Tax Returns
The majority of mortgage lenders will need at least 2 year's worth of tax information and/or company accounts to consider lending. So, if you have been self-employed for over 2 years or if your business is over 2 years old, you will have a much wider lender choice. There may still be some loan-to-value restrictions with certain lenders, but this can be discussed during your mortgage fact-find.
The same rules apply to the Directors and shareholders of companies. Generally, lenders will class you as self-employed if you hold more than 25% of shares. Some lenders will take 1 year's accounts, some will need 2 and take an average, or look at latest if it's lower, or marginally higher. Some lenders will also combine salary and dividends (after tax), or salary and share of net profit.