There’s no specific “self-employed mortgage” product. Most standard mortgages are open to self-employed applicants.
The difference is in the application process. Self-employed buyers often face extra criteria and need to prove income differently than employed applicants.
How Self-Employed Applications are assessed
The lenders mainly assess affordability, credit history, and income evidence.
They typically require 2 years of certified accounts and tax returns showing trading income. Many lenders also have minimum trading periods for self-employed – usually 2 years, but 1 year may be possible.
Business Type Impacts Income Evidence Needed
- Sole Trader – Lenders use an average of your total net income over 2-3 years from SA302 forms. Some lenders average, others use the most recent year if income rose yearly.
- Partnership – Your share of net profits is used if you have a 25%+ share. This is averaged over 2-3 years.
- Limited Company – Personal income is considered, not business profits. Directors can sometimes also supply company net profits. Salary, dividends, and retained profits may be considered.
Loan Amount
Being self-employed doesn’t limit borrowing, beyond impacting usable income for affordability. Your overall income amount, credit rating, and the lender’s specific criteria determine the loan amount.
Typically, a 4.5x income multiple is used. Some professions or high incomes may qualify for higher multiples. Your credit score and deposit can also positively or negatively affect lending multiples.
Deposit
Lenders can be more cautious with self-employed applicants. Offering the highest deposit you can comfortably afford is recommended.
No fixed minimum, but 10% is typically expected. More deposit reduces rates – 10%, 15%, 25%, 40% often trigger rate drops.
Improving Your Mortgage Chances
- Temporarily increase dividends to boost usable income
- Delay major business changes
- Ensure accounts are certified and taxes filed
- Improve credit rating
JAG Funding Solutions knows lenders’ self-employed criteria in depth. We’ll match you with lenders suited to your particular circumstances for the best chance of acceptance. We also have access to specialist lenders with competitive deals.
