MORTGAGES
Self-Employed Mortgages
Specialist solutions for self employed individuals and company owners
Can I get a mortgage if I am self-employed?
There is a widely held belief regarding self-employed mortgages, with many people believing that it’s almost impossible to secure a mortgage at a good rate if you are self-employed. However, that is not necessarily the case – it is possible to get an affordable mortgage even if you’re self-employed, so there’s no need to panic.
Our award winning and friendly mortgage team can help you secure your dream home if you are a sole trader, partner or limited company director. We have access to the whole of the market, to ensure we can find the most competitive deal for your circumstances, whilst taking all the stress away, so you can concentrate on your business while we manage the mortgage process and all the paperwork involved. Speak to one of our expert advisors today.
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Is it more difficult to get a mortgage if you are self-employed?
The fact is that in some instances getting a mortgage when you’re self-employed can be somewhat more challenging than getting a mortgage when you are a PAYE applicant. The issue with applying for a mortgage as a self-employed person is the fact that you need to be able to prove that you have a reliable income.
The good news is that there are various steps that you can use to show a mortgage lender that you do have a reliable income and can afford the repayments; usually, it’s a case of filling in some additional paperwork.
How do you get a self-employed mortgage?
When it comes to selecting a mortgage when you’re self-employed, you have access to the same mortgages as anyone else. Just like everyone else, you will need to pass the lender’s affordability checks to be eligible – this is a step that every borrower must undertake.
The difference comes in due to the fact that as a self-employed trader you have no employer to ‘vouch’ for your income; it’s for this reason that self-employed people are required to provide additional evidence of income compared to employed people.
The criteria that you need to meet in order to be able to access a mortgage is extremely strict – a mortgage lender will need to be able to see proof that you will be able to afford the cost of your mortgage before they agree to provide you with the loan amount that you require.
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How can you improve your chances of being accepted?
The good news is that there is a range of steps that you can take to increase your chances of being approved by a mortgage lender for a mortgage. These steps include:
- Save a high deposit – the higher your deposit amount, the better
- Improve your credit rating
- Correct any credit report issues
- Speak to a mortgage broker
- Find a specialist lender for your mortgage
How are self-employed mortgages assessed?
When it comes to how you will be assessed as a self-employed mortgage applicant, you will fall into one of three categories: sole trader, partnership, or limited company. The category that you fall into will impact how your mortgage application is assessed.
Sole trader: If it’s just you, you or your accountant – can declare your income via the HMRC self-assessment tool. Once this has been completed, you can then request a SA302 form and a Tax Year Overview, which will outline your income and tax that has been paid. Mortgage lenders will base your application on this information.
Partnership: If you run your business with someone else, your individual share of the business and your profits will be focused on.
Limited Company: If you have a limited company, your business accounts will be separate from your personal accounts. As a director of a company, you most likely pay yourself a salary and dividend payments – lenders will take both incomes into account when it comes to your mortgage application. Some lenders can also take retained profits in the business along with salary instead of dividends if you can provide finalised company accounts. This can help people who keep money in the business and do not pay themselves a dividend to increase their borrowing ability.
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Can I get a Mortgage with 1 year of accounts?
While most lenders will want a track record of earnings over at least 2 years, there are some circumstances where getting a mortgage with 1 year of accounts can work.
Firstly, lenders like to see that you have experience in the same field of business and the role you were doing previously has a direct link to your current business. This provides the lender with confidence in your ability to sustain the business and income, as you have the experience needed.
Secondly, lenders will often ask for projections for the second year by a qualified accountant. This can be vital and if prepared accurately with evidence of ongoing contracts which inturn shows demand, again this shows a lender that they can be confident in your business being successful and your ability to sustain your income and expenditure.
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The Award-Winning Matrix Mortgages Process – Easy as 1,2,3! Follow Our 3 Simple Steps to Securing Your Dream Home
1
Enquire
Complete our quick and easy contact form, email, call or WhatsApp us to get started
2
Apply
We handle all the necessary paperwork and help manage your entire mortgage process
3
Complete
All done. Sit back, relax, and feel great about your decision to work with us
Can working with a specialist mortgage broker help?
If you want to further improve your chances of having your mortgage application accepted, it’s a good idea to think about finding a specialist mortgage broker to help you with your application. If you are going to work with a mortgage broker, it’s a good idea to source a specialist mortgage broker for self-employed mortgages, as this will help to increase your chances of application success.
A specialist mortgage broker will be able to source specific self-employed mortgage options, suited to the needs of self-employed people. A mortgage broker will be able to determine who the most likely lenders are who will be able to offer you the mortgage amount that you require. By choosing to go down this route, you can reduce the risk of your mortgage application being declined. A declined mortgage application can have an impact on your credit score, which is why it’s so important to ensure that your application is now declined.
While getting a mortgage as a self-employed person can be somewhat more difficult, that does not mean that it’s impossible to have your mortgage application approved.
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FAQ
A mortgage is a loan from a bank or building society that allows you to purchase a property. The loan is repaid over several years with interest dependent on your personal financial situation.
A mortgage can be between one or more people. However, if you do not keep up your repayments, the lender can repossess your property.
All mortgage lenders have their own requirements. The following factors take a part in whether you will be given a mortgage offer, and how much the lender is willing to borrow you:
- Amount you wish to borrow
- Size of your deposit
- Employment status and income
- Credit rating
- Outgoings
- Existing debt
- Your age
- Length of the mortgage term
- Your credit status
- If you are applying solely or jointly
To be accepted by a lender, you need to assure lenders that you can repay your mortgage. One main aspect lender’s look at is your credit report to check your repayment history. Your credit file will include current and existing records on items such as credit cards, loans, overdrafts, mortgages, mobile phone/s, some utility payments and all accounts that have been open in the last 6 years. If your credit report shows arrears, defaults, CCJs, debt management plans or bankruptcy in the past, there are mortgage options available which we can help you with.
To get a mortgage you will need to save a deposit of at least 5%, but the more you save, the better your mortgage rate will be. If you have an existing property you own, you can use the equity in your property for this. Our skilled mortgage advisors can talk and guide you through the benefits and the difference in your monthly payments by increasing your deposit.
As soon as you have found the property you want to buy, our mortgage brokers will evaluate your personal needs and situations and recommend a mortgage product that is right for you. They will compare a wide variety of mortgage quotes, including products that cannot be found on the high street or comparison sites. This guarantees that you get the right deal at a right price.
If you agree to the mortgage product your advisor suggests, you will receive your Agreement in Principle (AIP). This will provide you with an estimated total of how much the lender is willing to borrow you and allows you to put an offer in on your ideal home.
If your offer is accepted, you will need to arrange a solicitor to deal with searches, surveys and contracts, which we can arrange for you. We manage the entire mortgage application process through to completion, liaising with your solicitor and lender to make sure your application is successful.
There are different mortgage options such as a remortgage. In this case we would recommend looking for a new mortgage deal approximately 3 months before your current deal expires. By beginning the mortgage process early it will allow you to prepare ahead of time to compare all the available mortgage products and submit your application. Do not worry if your mortgage is approved early as we will ensure that the completion date corresponds with your current deal’s end date.
A lot of mortgage lenders will lend you up to five times your salary. However, this all depends on several factors including your age, number of dependants and current financial commitments. Lenders will work out how much they will lend you based on what you can reasonably afford each month after you have paid your bills, credit cards, loans etc.
In addition, our mortgage advisers will assess your individual needs and situations to see how much you can realistically borrow before an application or credit search is completed. If you choose to continue with the application, our advisers will understand which mortgage lenders to approach to ensure you get the required loan amount.
In order to buy a property with a mortgage, you will need to save a deposit of at least 5%. However, the more you can save, the better your rate will usually be. There are a few exceptions to this as follows:
- If you already own a home, you can use the equity from your property for the deposit
- If you are a council tenant and are looking to buy your current home under the Right to Buy scheme, most mortgage lenders will now accept your Right to Buy discount as a deposit.
As property prices increase, first time buyers are struggling to save enough money to buy a home. In cases like this the government has therefore introduced ‘Help to Buy’ to allow first time buyers to get on the property ladder.
Our expert mortgage advisors are aware of various mortgage deals available and can help you decide which mortgage deal best fits your needs.
When buying a home, you will need to save enough money to pay for other factors and not just your mortgage deposit. This also includes paying for your mortgage fees, moving costs and legal expenses. We have listed below all the possible purchase and moving expenses you may have to pay, to help you with your budgeting. The exact fees and amount you will pay, is dependent on the value of the property you are buying and your chosen mortgage lender.
Mortgage booking fee: Some mortgage lenders will charge this to secure a fixed-rate or tracker deal.
Cost: £99 – £250
Mortgage arrangement fee: Some mortgage products will incur a mortgage arrangement fee, in addition to the mortgage booking fee. This fee is either paid upfront or added to your mortgage debt. If you chose to add it to your mortgage, the cost will increase over the lifetime of your mortgage.
Cost: £1,000 – £2,000
Telegraphic transfer fee: Needs to be paid to the lender to transfer the amount you are borrowing for the mortgage to the seller’s solicitor.
Cost: £25 – £50
Mortgage broker fee: If you use a mortgage advisor to arrange your mortgage for you, you will need to pay a fee or commission, depending on the value of your mortgage.
Cost: £197- £597. However, this may vary if you need to use a specialist lender
Valuation and survey fees: Charged by the lender to value the property you are buying. The cost varies according to which survey you choose:
Home condition survey: Most basic and cheapest of all the surveys and often used for new-builds.
Cost: £250
Homebuyer’s report: More in-depth survey, assessing the inside and outside of the property, and also includes a valuation.
Cost: £400
Building survey: A complete survey generally used for older or unconventional properties. Although they are the most expensive, they are certainly worth considering, as it could potentially save you a lot of money if any structural problems are found with the property.
Cost: £600
Higher lending charge: Can be charged by lenders if you borrow most of the value of the property.
Cost: Approximately 1.5% of the amount you borrow
Searches: Your solicitor will arrange for the local authority to check whether there are any issues that could affect the property’s value. The local council can charge a fee for carrying out these searches and may also request that a drains search be done at the same time.
Cost: £250 – £300
Legal costs: You will need to instruct a solicitor to carry out the necessary legal work for you.
Cost: £850 – £1,500 plus VAT
Stamp Duty Land Tax (SDLT): Charged on all purchases of UK land and property over £125,000. However, the amount you will pay is dependent on the purchase price of the property you are looking to buy, and whether you have owned a home before as follows:
First home: First-time buyers are exempt from paying SDLT on the first £300,000 of the purchase price of a property up to the value of £500,000. All purchases in excess of £500,000 will pay the standard stamp duty rates as follows:
- £0 – £300,000: 0%
- £300,001 – £500,000: 5%
Next home: If you are currently or have previously been a homeowner, you usually pay SDLT on increasing portions of the property price:
- £0 – £125,000: 0%
- £125,001 – £250,000: 2%
- £250,001 – £925,000: 5%
- £925,001 – £1.5 million: 10%
- £1.5 million+: 12%
Second property: If you are looking to buy an additional property, you usually have to pay 3% on top of the normal SDLT rates as follows:
- Less than £125,000: 3%
- £125,001 – £250,000: 5%
- £250,001 – £925,000: 8%
- £925,001 – £1.5 million: 13%
- £1.5 million+: 15%
For example, if you buy a next home for £275,000 the SDLT you owe is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT = £3,750
Information correct as of October 2021 – Source: www.gov.uk/stamp-duty-land-tax
Removal costs: Paid to the removal firm (if you choose to use one) to pack, transport and deliver your possessions to your new home.
Cost: £300 – £600
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