Self-Employed Mortgages UK: A Guide for Sole Traders, Contractors & Company Directors
Self-employed and looking for a mortgage? Learn how lenders may assess your income, how many years of accounts you could need, which documents may be requested and how Gordon Blair Financial Services can help you understand mortgage options based on your circumstances.
Can you get a mortgage if you're self-employed?
Potentially, yes. Being self-employed does not automatically prevent you from getting a mortgage.
Self-employed applicants generally apply for the same types of residential mortgages as employed borrowers. The important difference is often how a mortgage lender establishes and assesses your income.
If you receive a regular salary from an employer, income can often be evidenced through payslips and other employment records. If you run your own business, work as a contractor or receive income through a limited company, the assessment can be more involved.
Different mortgage lenders can have different criteria for self-employed borrowers. Understanding those differences can be particularly important before submitting a mortgage application.
How might lenders view different types of self-employed borrower?
The way your income is assessed can depend on how you earn your money and how your business is structured.
Lenders may consider income or profits shown through tax calculations, tax year overviews and business accounts, depending on their criteria.
Assessment may include salary and dividends, while some lenders may consider other company figures subject to their individual criteria.
Lenders may look at historic earnings, current contracts or other evidence depending on your occupation and working arrangements.
How many years of accounts do you need for a self-employed mortgage?
There is no single rule that applies to every mortgage lender.
An established trading history can make it easier for a lender to assess how your business has performed over time. Depending on the lender and circumstances, accounts and tax information covering multiple years may be requested.
However, having a shorter self-employed trading history does not necessarily mean that no mortgage options are available. Some lenders may consider applicants with a more limited history where their criteria are satisfied.
This makes it important to establish which lenders may consider your particular situation before making an application.
Can you get a mortgage with one year's accounts?
Potentially. Although a longer self-employed trading history may provide access to more options, some lenders may consider applicants with around one year's trading history or accounts, subject to their criteria and the applicant's wider circumstances.
What documents might you need for a self-employed mortgage?
Requirements vary according to the lender, your business structure and your individual circumstances.
- Business accounts where required
- SA302 tax calculations where applicable
- HMRC tax year overviews where applicable
- Personal bank statements
- Business bank statements where requested
- Proof of identity and address
- Evidence of your mortgage deposit
- Company information for directors
- Current contracts where relevant
- Details of existing financial commitments
How is sole trader income assessed for a mortgage?
If you operate as a sole trader, lenders may use your declared self-employed income when assessing affordability.
The exact figures used and the period over which income is assessed can vary between lenders. Where income changes from one year to another, lenders can also differ in how they approach that variation.
This can become particularly important if your most recent year's earnings are substantially higher or lower than previous years.
How do lenders assess income for limited company directors?
Mortgage affordability for a company director can be more complex because personal income and company finances are not always the same.
Depending on shareholding and lender criteria, a company director may be treated as self-employed for mortgage purposes.
Income paid to you as salary may form part of a lender's affordability calculation.
Dividends received from the company may also be considered, depending on lender criteria.
Certain lenders may have criteria allowing them to consider additional company financial information in appropriate cases.
Can retained company profits help with a mortgage application?
This is an important consideration for some limited company directors.
Directors sometimes choose to leave profits inside their company rather than withdrawing all available income personally. As a result, salary and dividends alone may not always show the complete financial performance of the business.
Lenders can take different approaches to company directors and retained profits. Some may primarily assess salary and dividends, while certain lenders may have alternative assessment methods subject to their criteria.
If you retain significant profits within your company, discussing this with a mortgage adviser can help establish how different lenders might assess your circumstances.
Can contractors get a mortgage?
Potentially, yes. Contractors can obtain mortgages, although the way income is assessed can depend on the lender, profession, contract arrangements and trading history.
What if your self-employed income changes from year to year?
Fluctuating income is common for business owners, freelancers, contractors and other self-employed professionals.
Lenders may look at your income history to understand whether earnings are stable, increasing or decreasing. How those figures are interpreted depends on the lender's criteria.
If your latest year's income has increased substantially, a lender may not necessarily base affordability solely on the newest figure. If income has fallen, the reason for the reduction may also be relevant to the assessment.
How much can you borrow if you're self-employed?
There is no universal borrowing figure that applies to every self-employed mortgage applicant.
Lenders use their own affordability models and eligibility criteria. Your assessable income is important, but it is only one part of the overall calculation.
- Self-employed income considered by the lender
- Loans and credit commitments
- Credit card balances
- Regular expenditure
- Financial dependants
- Mortgage term
- Deposit size
- Loan-to-value
- Credit history
- Individual lender affordability criteria
Do self-employed borrowers need a bigger mortgage deposit?
Being self-employed does not automatically mean that you must provide a larger mortgage deposit.
The deposit required will depend on factors including the lender, mortgage product, property, loan-to-value and your overall circumstances.
A larger deposit reduces the percentage of the property's value that needs to be borrowed and may affect the mortgage products available, but eligibility remains subject to lender criteria.
Can you get a self-employed mortgage with bad credit?
Previous credit problems do not necessarily mean that obtaining a mortgage is impossible.
The options available can depend on the nature of the credit issue, when it occurred, its value, whether it has been resolved and the lender's criteria.
Where an application involves both self-employed income and adverse credit history, establishing which lenders may consider the overall circumstances can be especially important before applying.
How can you prepare for a self-employed mortgage application?
Preparing early can help make the mortgage application process more straightforward.
- Keep business accounts up to date
- Keep relevant tax records available
- Maintain clear personal financial records
- Maintain business records where applicable
- Check your credit reports for inaccuracies
- Understand your current financial commitments
- Keep evidence of your deposit
- Avoid unnecessary applications for new credit
- Prepare company information where relevant
- Speak to a mortgage adviser before applying
Can a self-employed first-time buyer get a mortgage?
Potentially, yes. You can be both a first-time buyer and self-employed.
A lender will consider your income, affordability, deposit, credit history and other relevant circumstances alongside its requirements for self-employed applicants.
If you are planning your first property purchase, understanding your potential borrowing before beginning a serious property search can help you establish a more realistic buying budget.
Can you remortgage after becoming self-employed?
Becoming self-employed since taking out your existing mortgage can affect the way a new lender assesses your income.
If you are approaching the end of your current mortgage deal, your employment status and current income position may form part of any new affordability assessment.
The options available can depend on your trading history, income, property value, outstanding mortgage balance, credit profile and the criteria of individual lenders.
Why use a mortgage broker when you're self-employed?
Self-employed mortgage applications can involve more variables than simply comparing advertised mortgage rates.
When can self-employed mortgage advice be particularly useful?
- You have only recently become self-employed
- You have around one year's accounts
- You are a limited company director
- You retain profits within your company
- Your income varies significantly each year
- You receive salary and dividends
- You work on fixed-term contracts
- You have several sources of income
- You have previous credit problems
- You have been declined by another lender
How does the self-employed mortgage process work?
Discuss your business, income, deposit, commitments and property plans.
Establish which accounts, tax records and other evidence may be needed.
Consider lenders and mortgage options relevant to your circumstances.
Seek an initial lending indication where appropriate.
Progress the mortgage through underwriting and valuation.
Self-employed mortgage advice from Gordon Blair
If you run your own business, work freelance, operate through a limited company or earn your income through contracts, understanding how lenders may assess you is an important part of planning your mortgage.
Gordon Blair Financial Services can review your individual circumstances, discuss your income and property plans and help you understand mortgage options that may be suitable for you, subject to lender criteria.
Whether you are buying your first home, moving home or considering a remortgage, our mortgage advisers can support you through the mortgage process.
Self-employed mortgages: FAQs
Is it harder to get a mortgage if you're self-employed?
Self-employment does not automatically prevent you from obtaining a mortgage. However, demonstrating income can involve additional documentation and lenders can assess self-employed applicants in different ways.
How many years of accounts do I need for a mortgage?
Requirements differ between lenders. An established trading history can provide more evidence of income, but some lenders may consider applicants with a shorter trading history where their criteria are met.
Can I get a mortgage with one year's accounts?
Potentially. Some lenders may consider self-employed applicants with around one year's accounts or trading history, depending on the applicant's circumstances and the lender's criteria.
Do I need SA302s for a self-employed mortgage?
A lender may request SA302 tax calculations and HMRC tax year overviews where relevant. The exact documentation required depends on the lender and your business structure.
Can a sole trader get a mortgage?
Potentially, yes. Mortgage lenders can consider applications from sole traders, although the income evidence and assessment method will depend on lender criteria.
Can a limited company director get a mortgage?
Potentially, yes. Depending on your shareholding and the lender, you may be assessed as self-employed. Salary, dividends and other company information may be relevant to the assessment.
Can a mortgage lender consider retained company profits?
Lenders can assess company directors differently. Some may primarily consider salary and dividends, while certain lenders may have criteria that allow other company financial information to be considered in appropriate circumstances.
Can contractors get mortgages?
Potentially, yes. A lender may consider factors including your contract, contract history, income, profession and wider financial circumstances.
Do self-employed people need a bigger mortgage deposit?
Not necessarily. Deposit requirements depend on the mortgage product, lender, property, loan-to-value and your overall circumstances rather than self-employment alone.
Can I get a self-employed mortgage with bad credit?
Potentially. Available options depend on factors such as the type, value and age of the credit issue, whether it has been resolved and the lender's criteria.
How much can I borrow if I'm self-employed?
The amount depends on the income a lender is prepared to consider, your financial commitments, expenditure, deposit, mortgage term, credit profile and the lender's individual affordability assessment.
Can I get a mortgage if my self-employed income has increased?
Potentially. How an increase in income is treated varies between lenders. A lender may review current and previous financial results when deciding how much income it is prepared to use.
Can I remortgage after becoming self-employed?
Potentially, yes. A new lender may need to assess your current self-employed income and trading history as part of its affordability and eligibility checks.
Should I speak to a mortgage broker before applying?
Speaking to a mortgage adviser before submitting an application can help you understand how your income may be assessed, what documents could be required and which lender criteria may be relevant to your circumstances.
Can Gordon Blair help with a self-employed mortgage?
Gordon Blair Financial Services can review your individual circumstances and help you understand mortgage options that may be suitable, subject to affordability, eligibility and lender criteria.
Self-employed and looking for a mortgage?
Speak to Gordon Blair Financial Services about your income, trading history, deposit and property plans. Our mortgage advisers can help you understand the options that may be available based on your individual circumstances.
Book a Free Mortgage AppointmentThe information in this article is for general information purposes only and does not constitute personalised mortgage, tax, accounting or legal advice. Mortgage availability is subject to lender criteria, affordability assessments and individual circumstances. Lender requirements can change. Seek appropriate professional advice where required.
