Lenders make the mortgage application process a little more onerous for the self-employed. Self-employed workers are perceived as being high risk borrowers, and so there can be a few extra hoops to jump through. Demonstrating to your bank or building society that you have enough income is the goal. However, this can be done by gathering the right paperwork.
Who is considered self-employed?
For the purposes of mortgages, anyone who is company director, contractor or sole trader. If your income results primarily from your business, you are likely to be viewed as self-employed.
Can a self-employed person access the same mortgage deals as anyone else?
Yes, you will go through the same application process as any other borrower. You should be able to access the same interest rates. Mortgages are usually granted based on your income, the size of your deposit and your credit score.
However, you are likely to be asked for more proof on income than an employed person, and some lenders may have strict criteria.
What documents will I need for a self-employed mortgage application?
All mortgage applicants will need to show:
- Passport or driving licence;
- Utility and council tax bills;
- Up to six months of bank statements;
- Proof of deposit in a bank account;
- A life insurance policy.
Self-employed people will also need:
- SA302 form, which can be filled out on the HMRC website;
- Something to demonstrate proof of income, such as certified accounts;
- You may need to show dividend or salary payments if you are a company director, or evidence of upcoming contracts if you work freelance.
To put together the accounts, you may need the support of an accountant. Be aware that some lenders may ask to see additional documentation depending on your circumstances.
How much I can lend for a self-employed mortgage?
On average, lenders will usually offer up to 4.5 times your annual income, although some banks may be willing to lend a little more depending on the size of your deposit.
How can I find the best deal for a self-employed mortgage?
Seek out independent financial advice. An accredited mortgage broker[SR1] will be able to advise you and suggest lenders who can get you the right mortgage for your circumstances.