How to get a self-employed mortgage approved first time, every time
March 20, 2017
Getting a self-employed mortgage
If you own your own business, you are probably used to hearing how difficult it is nowadays to get a self-employed mortgage - but this simply isn’t true. The process has certainly changed, as Self-Certification mortgages which enabled self-employed individuals to borrow money without proving their income, are no longer in use. But, your chances of getting a mortgage are just as good as anyone’s and here’s how.
Most mortgage lenders deem self-employed individuals to be a higher risk than a salaried employee, and therefore require at least 2 years accounts in the form of an SA302 form (proof from the HMRC that you have reported your income) and a tax year overview - be wise and use a chartered or certified accountant to help you with this. They will ensure that your accounts are up to scratch and help you understand any details that you are not too sure about.
If you have less than 2 years’ accounts, it’s not the end of the world! There are lenders who will consider you. But, you will need to prove that you have either; have regular work, recently left full time employment and started contracting or can guarantee that you will have regular work in the near future.
Everyone loves stability
The self-employed mortgage process differs according to the set-up of your business:
- Sole trader: A mortgage lender will look at your profits when assessing your income and usually request an SA302, to see the total income received and tax due.
- Partnership: If you go into business with someone else, lenders will look at each partner’s share of the profit to determine you annual salary.
- Limited company: The lender will need to see your business and personal accounts separately, in order to assess your mortgage affordability.
As lenders love to see consistency, you should delay making any changes to the structure of your company if you are considering this. If you can’t, it’s probably worthwhile postponing your mortgage application, in order for lenders to clearly see how the changes have affected your business.
It’s usually always a good idea to retain more profit within the business. But, if you are too stringent with your income, it could affect your chances of getting a mortgage, so treat yourself! Paying yourself a higher wage for a period of time can help boost both your mortgage application and your savings - make sure you can still afford your mortgage repayments and other outgoings, if you choose to reduce your salary again though.
Save, save, save!
As with all mortgage applications, the larger your deposit, the lower your repayments will be – but, it can improve your chances of getting a mortgage even more so when you’re self-employed.
Let your partner take the lead
If your partner is a salaried employee, then adding them as the first name on your mortgage application, could also help your chances of getting it approved. They may not earn as much as you, but lenders will favour them, as their income is looked at as being more regular and predictable.
Seek expert advice
Our mortgage advisors are experts in self-employed mortgages and can help advise you on how much you can afford to borrow, and source the best lenders to suit your individual needs, in order to maximise your chances of being approved first time. If you decide that a mortgage is the right choice for you, they will also complete all the relevant paperwork, and liaise with your lender, estate agent and solicitors to ensure that your application is a success!