For many self-employed people, applying for a mortgage can feel more complicated than it should.
You may earn a good income. Your business may be successful. You may have a healthy deposit and strong financial habits. Yet when it comes to mortgage applications, the questions can feel very different compared with employed applicants.
- How many years of accounts do I need?
- Will lenders use my latest year’s income?
- What if my profits have changed?
- Can dividends count?
- What if I’m a sole trader?
These are questions HFA Mortgage & Protection regularly hears from self-employed clients.
The good news is that being self-employed does not mean you cannot get a mortgage. It simply means lenders may assess your income differently.
Our Clients’ Self-Employed Scenario
Recently, we spoke with a client who had run his own business for several years. His income was strong, but it varied year to year depending on contracts, investment in the business and seasonal demand.
Before speaking to us, he had assumed getting a mortgage would be difficult because his income was not the same every month. He had also been told by friends that lenders would only look at the lowest income year, which made him nervous about applying.
After reviewing his accounts, tax calculations, business structure and future plans, we were able to explore lender options that better understood his circumstances.
The key was not simply the amount he earned. It was how that income was evidenced and how different lenders assessed it. Every lender has different criteria, and this can make a significant difference for self-employed applicants.
How Lenders Assess Self-Employed Income
Lenders may look at several different things when assessing a self-employed mortgage application.
This can include:
- SA302s and tax year overviews
- Company accounts
- Salary and dividends
- Net profit
- Retained profits
- Business bank statements
- Trading history
The exact requirements can vary depending on whether you are a sole trader, limited company director, contractor or partner within a business.
Some lenders may average income over two or more years. Others may consider the latest year more favourably where there is a strong reason to do so. Some may take a different view on dividends and retained profits.
That is why advice can be so important.
Why Mortgage Application Preparation Matters
Self-employed mortgage applications often benefit from preparation. Before applying, it can help to have key documents ready and understand how your income is likely to be viewed.
This may include speaking to your accountant, reviewing your latest accounts and avoiding assumptions based on what another self-employed person experienced.
Two business owners can have very different mortgage options depending on their structure, income pattern and lender criteria. Preparation can also help reduce delays once you find a property.
Common Self-Employed Mortgage Misconceptions
One common myth is that self-employed applicants need perfect accounts and years of identical income to be considered. That is not always the case.
Another misconception is that all lenders assess self-employed applicants in the same way. Again, this is not true.
Some lenders may be more flexible than others depending on the circumstances. The right route often depends on understanding the details properly before approaching lenders.
Speak To HFA Mortgage & Protection
At HFA Mortgage & Protection, we help self-employed clients understand their mortgage options clearly.
Whether you are a sole trader, contractor, company director or business owner, getting advice early can help you understand what may be possible and what documents may be needed.
Visit https://hfassociates.uk to learn more.
Can I Get A Mortgage If I’m Self-Employed – FAQs
Can I get a mortgage if I’m self-employed?
Potentially yes. Lenders will assess your income, affordability, deposit, credit history and supporting documents.
How many years of accounts do I need?
This depends on the lender. Some may prefer two or more years, while others may consider shorter trading histories in certain circumstances.
Can dividends count as income?
Some lenders may consider salary and dividends for limited company directors, depending on the circumstances.
Will lenders use my latest year’s income?
Some may, while others may average income over multiple years. Criteria varies between lenders.
Is it harder to get a mortgage when self-employed?
It can be more detailed, but not necessarily impossible. Good preparation and advice can help.
Should I speak to a mortgage adviser before applying?
Yes. Understanding lender criteria early can help avoid unnecessary delays or unsuitable applications.
Disclaimer:
There may be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances but will range from £195 to £1500.
Your home may be repossessed if you do not keep up repayments on your mortgage.
