How Do I Get A Mortgage If I’m Self-Employed?
How Do I Get A Mortgage If I’m Self-Employed?
If you are self-employed, you can still secure a mortgage to buy your own home, but you need to be clear on what information a potential lender will be looking for. The key factor is that since 2011 it has no longer been possible to acquire a ‘self-certification’ mortgage, so you will have to prove how much you earn. This can be more complex for someone who is self-employed, but it’s a matter of getting your paperwork and accounts in order.
For mortgage purposes, you will be classed as self-employed if you own 25% of a business or more.
What criteria will I have to meet?
Most lenders will consider providing a mortgage to someone who is self-employed, as long as they meet the following criteria:
- At least three years of trading
- Two full years of accounts/self-assessment tax returns available
Each individual lender will vary in terms of additional criteria they put in place for self-employed people. Some may require a higher deposit, have specific rules around credit ratings or require information about future income and contracts. It’s well worth researching the different lenders and their offer for self-employed customers. If you find this confusing, a specialist mortgage broker can help.
How Will My Mortgage Be Calculated?
Again, each lender will vary in terms of how much you can borrow and the way it’s calculated. Some lenders will take several previous years of income into account, while other may only be prepared to base your mortgage on your last full year of trading.
The legal status of your company also makes a difference. If you are a sole trader or a partnership, lenders view net profit as income. If you are a limited company, they will look at your salary and dividends. Net profit of the company may also be looked at.
Can I Improve My Chances Of Being Accepted?
Yes! Make sure you have all your accounts and records up to date, and use an accountant if you need help ticking all the boxes. Complete a self-assessment SA302 form to prove your income – the lender will be most concerned that you can afford the monthly repayments, so the more evidence you have to support this, the better.
You will have a better chance of being accepted if your business has been trading for at least two years, and if you can provide evidence that you have a decent deposit to put down.
Lastly, keep a regular check on your credit file and make sure there are no adverse information that could affect you. If there is anything that needs addressing or your score is low, it will really help your application if you can resolve these before starting your mortgage application.
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