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Self Employed Mortgages

Without the reassurance of a guaranteed salary, self employed borrowers often find it harder to obtain a mortgage than those in standard employment.

With lenders being more sceptical towards those with irregular income, self employed borrowers often have to go to further lengths to prove to lenders that they are a worthy investment. Despite this there are still a number of lenders who are willing to offer competitive mortgage deals to self employed buyers, providing that you can prove to them that you can afford the mortgage.

To investigate your mortgage options call our team on 0117 959 5094 or fill in our call back form

Proving you can afford the mortgage

Here are 6 ways in which you can help prove to lenders that you can afford the mortgage repayments, and will put you on your way to securing a competitive mortgage deal.

  1. Budget your savings – Lenders are likely to look at all of your regular outgoings when considering your application. Consequently, you should look to cut down on all food bills, phone bills etc in as much time as possible leading up to your mortgage application.
  2. Improve your credit score - By paying of any debts when they’re due including credit cards and phone bills; you could help ensure that you have a good credit rating. A lender will take your credit rating into consideration when reviewing your application.
  3. Save for a hefty deposit – The more savings that you have available to put down on a deposit, the more inclined a lender will feel to offer you a mortgage. You are likely to need a deposit of between 10% and 25%.
  4. Keep your accounts in order – Lenders will typically want to see two years of accounts along with your SA302 form to give an indication as to how much you owe in a given year.
  5. Hire an accountant – The majority of lenders will accept your evidence of income in the form of yearly accounts if they are provided by a certified accountant.
  6. Contact a mortgage broker – A mortgage broker will be able to review your personal situation and assist in finding a mortgage deal with a competitive rate and that you’re eligible for. They also often have access to exclusive deals that you will not be able to find on the high street. 

Types of Self employed mortgage

In theory, providing that you are able to prove that you can make the required repayments on the loan, as a self employed buyer you will have access to the exact same range of mortgages as those with regular incomes. Whilst there are considerably fewer specialist lenders with products designed specifically for self employed buyers, it is not uncommon for mainstream lenders to routinely offer the self employed mortgage deals. It is therefore advised that you shop around and review what both mainstream and specialist lenders can offer you.

In regards to how a lender will assess your income, they are also likely to review your application differently depending on which of the three business structures you have set up.

  • Sole Trader - If you are a sole trader, it is likely your lender will look at your profits when assessing your application. In order to do this, they usually will ask that you provide them with SA302 form, which shows the total tax income received and your total tax that is due.
  • Partnership - Within a partnership structure, a mortgage lender is likely to look at each partner’s share of the profit. Consequently, you should have accounts that show exactly how much you have made so your lender can easily view your annual income.
  • Limited Company - As a director of a limited company, it is likely that you will pay yourself a basic salary plus dividend payment. If this applies to you, you should ensure that the lender takes both these elements of your income into consideration when assessing your mortgage affordability.

It is also important to take into consideration that the amount that you will be able to borrow will be primarily based on the amount of money that you earn.

Nowadays, many self employed people look to minimise their earnings in their account in order to reduce the amount they are required to pay in tax. Consequently by doing this, they are likely to reduce the amount available to borrow when buying a new house. So if you need a larger loan, you should look to increase the amount that you declare in tax.

Finding the best self employed mortgage

We work with the majority of UK mortgage lenders, which means we have access to self employed lenders with flexible criteria and competitive rates for self employed buyers. Our team of mortgage specialists can help evaluate your personal situation, and help you in finding a mortgage that fits your self employed needs.

To investigate your mortgage options call our team on 0117 959 5094 or fill in our call back form
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