How does a Self-Employed mortgage differ from other mortgages?

Although as a Self-Employed applicant you will have to provide more substantial documented proof of your working history, the mortgage itself is no different to mortgage products available to other applicants.

As Self-Employed income is seen as less stable than PAYE income, Mortgage Lenders typically use an average of two to three years worth of income to calculate your mortgage, although some can work from one years figures. This is to mitigate the risk of fluctuations in your income and provides a more accurate long-term representation of your annual income.

Which specific documents do you need?

Whereas PAYE has to provide three months worth of payslips in support of their mortgage, as a Self-Employed applicant, you will need to provide evidence of your income for the most recent one to three years in your current role, based on the lender’s preference.

The specific documents required vary depending on the type of Self-Employed activity you carry out. There may also be some degree of variation between lenders, with some being slightly more flexible than others.

Aside from the proof of address and ID that all applicants will have to provide, you will need to provide the following, based on your employment type:

Limited Company Director

The vast majority of lenders will use your personal income and dividends to calculate an average income figure. There are a small number of lenders who will consider your net business profits alongside your personal income.

The most recent two to three years’ worth of the following will be required to evidence this:

• Certified business accounts
• SA302 tax calculations
• In some cases business banking statements
• Some lenders may also request future business plans, a projection from an accountant or SA100’s

Partnership

In order for your income from a partnership to be counted towards a mortgage application, you must own at least 25% of a business. If you meet this requirement, an average of your share of the net profits for the most recent two to three years of trading will be used. See the list of documents for Limited Company Directors above, which will also apply to partners.

Sole Traders and Freelance workers

You will need to provide proof of income for the past one to three years in your current role. The following documents are needed for this:

• Certified accounts or
• SA302 tax returns

Contractor

It can be difficult to prove a stable income as a contractor and lenders may need extra evidence that you have ongoing offers of work. To evidence your income you will need:

• SA302 forms
• Finalised accounts
• Signed contracts for future guarantee of work, where available

How do you improve your chances of being accepted by a lender?

Mortgage preparation is helpful for all applicants, however, it can be a key part of securing a mortgage for Self-Employed applicants. Our Mortgage Brokers can help you to prepare by ensuring that you meet lender criterias, before you apply for a mortgage.

The following preparations will benefit your application:

Improve your credit score

• Ensure you are registered on the electoral roll (at your current address)
• For a substantial period prior to application, maintain utility bills and credit cards repayments, paying on time and if possible, in full
• Make an attempt to repay existing debts
• If you have existing credit agreements, minimise their use to within 50% of the credit limit
• Don’t take out any additional credit