Self-employed mortgage guide
Being self-employed doesn't mean you can't get a mortgage. We look at how much you can borrow on self-employed mortgages, how to boost your chances of being accepted and find the best mortgage deals.
KEY INFORMATION
Self-employed mortgages explained
- Being self-employed doesn’t mean you can’t get a mortgage, but it may be more difficult. Especially if you have an irregular income or you’re newly self-employed.
- You’ll usually need at least 2 years of accounts when applying for a self-employed mortgage. But some lenders will accept less.
- There are steps to boost how much you can borrow on a self-employed mortgage.
- Different lenders have different lending criteria, so get fee-free advice from a mortgage broker to find the best lender for you.
What are self-employed mortgages?
If you’re self-employed and apply for a mortgage, this is known as a self-employed mortgage. Although you won’t see products specifically named as ‘self-employed mortgages’. Getting a mortgage when you’re self-employed can be more difficult and you’ll have to provide different evidence about your income, read on for more on this.
Understanding self-employed status for mortgages
Each mortgage lender sets its own criteria on how they define self-employed. But you’ll generally be considered self-employed if you own at least 20%-25% of a business, from which you earn your main income. This includes:
- Sole traders: Individuals who run their own businesses and are personally responsible for its debts.
- Contractors: This typically involves providing services or skills to another business for a set or contracted period of time. As a contractor, you could be a sole-trader or run your own limited company.
- Director or partner of a limited company. This means the responsibility for a business is shared between directors / partners / shareholders.
Am I self-employed if I’m a freelancer?
- It’s likely that you’ll be considered self-employed by a mortgage lender if you’re a freelancer, although it will depend on the individual mortgage lender.
Are agency and umbrella workers self-employed?
- If you’re an agency worker, including agency workers paid via an ‘umbrella’ company, you’re unlikely to be considered self-employed. However, you may experience similar difficulties to self-employed people when trying to get a mortgage. So it’s a good idea to get fee-free advice from a mortgage broker.
The best mortgage depends on your personal circumstances. The award-winning expert advisers at Mortgage Advice Bureau will find the right mortgage for you.
Need mortgage advice?
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Get mortgage advice now
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
Reasons why being self-employed can make it harder to get a mortgage
Here are some of the common reasons why being self-employed can make it more difficult to get a mortgage:
– If you have an irregular income
Mortgage lenders generally prefer to see a steady level of income. So if your self-employed income has fluctuated in recent years or if you’ve had some time off recently, bringing down your average or typical income, this may limit how much a lender will let you borrow on a mortgage.
– You’re recently self-employed
When you’re self-employed and applying for a mortgage, lenders will usually ask to see two or more years of certified accounts. If you’ve been self-employed for less time, you may find it harder to get a mortgage, especially if you’ve been self-employed for less than one year.
– You choose the wrong lender
Different lenders have different lending criteria. For example, some will limit the size of loans they’ll lend to self-employed mortgage applicants. So if you’re self-employed, get fee-free advice from a mortgage broker who will find the best mortgage for you.
Get personalised self-employed mortgage advice by speaking to the award-winning expert advisers at Mortgage Advice Bureau. Compare deals or speak to an adviser today.
How common are self-employed mortgages?
Lending on self-employed mortgages is set to rise by 67% over the next five years, from £20.9 billion in 2023 to £34.8 billion by 2029, according to specialist lender Together. There are currently around 4.3 million self-employed people in the UK.
Proving your income for self-employed mortgages
When applying, you’ll usually need to provide:
- Certified accounts: You’ll usually need at least two years’ of accounts when you apply for a self-employed mortgage, although some lenders accept less. Lenders tend to prefer that your accounts have been prepared by an accountant. If they’re not, you may have less choice of lenders to choose from.
- Tax year overviews/ SA302 forms: You’ll usually need at least two years worth of these.
- Evidence of upcoming work: If you’re a contractor lenders may want to see evidence of upcoming contracts. You may be asked for evidence of dividend payments or retained profits if you’re a company director.
This is on top of the usual documents you’ll need to provide for a mortgage such as:
- Bank statements: You’ll typically need three months of statements although some lenders require more. If you’re self-employed you may need to show business bank account statements too.
- Proof of ID and current address. Such as your passport and utility or council tax bills.
- Proof of deposit: You can do this by showing bank account or saving account statements. A gifted deposit from parents needs to be backed up with their bank statement and letter confirming it is a gift.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau. Compare deals or speak to an adviser today.
Need mortgage advice?
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Get mortgage advice now
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
How lenders decide how much you can borrow on self-employed mortgages
Here are some of the factors that will determine how much you can borrow on a self-employed mortgage:
1. How much is your income
How much you earn is an important factor a lender will take into account. If you’re self-employed, how your earnings will be calculated for mortgage purposes depends on the type of self-employed worker you are.
- Sole trader: Lenders will often look at your net profits over the past two or three years and take the average.
- Limited company director: You’ll usually pay yourself a salary and dividend payments and both will typically be taken into account by a lender. Be aware that if you choose to retain profits in your business rather than drawing them out, this can cause problems as some lenders don’t include retained profits in their calculations. Get fee-free advice from a mortgage broker to find out more.
- Contractor: Lenders may take the average of your income over the last few years. However, some lenders may take an annual figure calculated from your day rate.
2. How much are your outgoings
The lender will also consider your household spending each month, such as your council tax and utility bills, loan or credit cards, car payments, childcare costs, any school fees and insurance. They’ll also take into account your every day expenses such as spending on food, holidays and leisure.
3. How good your credit score is
Just like with any mortgage, when you apply for self-employed mortgages the lender will check your credit history. Read our guide on 11 tips to improve your credit score for a mortgage.
KEY INFORMATION
How to improve your chances of getting a mortgage when self-employed
Ways you can improve your chances of getting a mortgage when self-employed include:
- Getting an accountant: Some lenders require that your accounts have been prepared by an accountant.
- Beware of changing your business model. If you switch from being a sole trader to a limited company, some lenders may consider you a brand new business – even if you’ve been trading for years.
- Saving the largest deposit possible: Having a bigger deposit means you’ll typically have a larger choice of mortgages and potentially access to the best mortgage rates too. You may want to consider a Lifetime ISA. Find out more in our guide How to save for a deposit
- Cut back on spending. Lenders will go through your outgoings when deciding how much to lend to you. So slash your spending in the months before applying for a self-employed mortgage if possible.
- Boost your credit score: When you apply for a mortgage the lender will look into your financial history. The better your credit score, the better your chances of being accepted for a mortgage, plus you may be able to borrow more and at lower rates. Find out more in our guide Tips to improve your credit score for a mortgage.
- Don’t apply for credit shortly before applying for a mortgage. When you apply for credit it leaves a mark on your credit file. If you have these on your file in the months before applying for a mortgage it can make you look desperate for credit.
- Register to vote. This data helps lenders confirm your name and address, so your score will increase as a result. Be sure to do this before you apply for a mortgage.
- Speak to a mortgage broker who will find the best self-employed mortgage for you.
Self-employed mortgage calculator
Use our free mortgage cost calculator to see instantly what your monthly mortgage payments will be for different options to work out what you can afford.
Boost your borrowing power with a joint mortgage application
Limitations on how much you can borrow on self-employed mortgages
- If you’re self-employed you may face limits on how much you can borrow on a mortgage in the UK. For example, some lenders won’t lend to self-employed people above certain LTV (loan to value ratio) limits.
How long do I need to be self-employed for to get a mortgage?
Most lenders require you to have two or three years of certified accounts when considering to lend you a self-employed mortgage in the UK. However, some lenders will accept less.
Can I get a self-employed mortgage with 1 year of accounts?
- It may be possible to get a mortgage if you’re self-employed with only 1 year of accounts. For example, Halifax considers lending self-employed mortgages to people with just 1 year of accounts (subject to meeting its lending criteria). However, some lenders may require that you’ve had previous experience in the field of work. It’s advisable to get fee-free advice from a mortgage broker.
Can I get a mortgage if I’m newly self-employed?
- It can be very difficult to get a mortgage if you’re newly self-employed but there may be exceptions such as if you were employed previously and will be contracting with the same firm or if you have a large deposit. Again, it’s crucial to get advice from an expert mortgage broker on this, based on your circumstances.
Why is it difficult to get a mortgage if you’ve just become self-employed?
- Mortgage lenders want to be satisfied that you’ll be able to make repayments on any mortgage it lends to you. If you can’t prove a track record of your self-employed earning ability in the form of accounts, you’re likely to find it much harder to get a mortgage.
Get fee-free self-employed mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Do self-employed people have to pay higher mortgage rates?
- You shouldn’t have to pay higher mortgage rates just because you’re self-employed. If you can provide proof of your income and the lender is satisfied that you can afford the mortgage you should pay the same rate as someone who is in a permanent full-time job.
- However, lenders’ criteria may be stricter if you’re self-employed. And depending on your circumstances, if this means you have access to a smaller pool of lenders you may end up having to pay a higher mortgage rate than if you were in permanent employment.
How to find the best self-employed mortgage deals for you
Here’s the step-by-step process to finding the best self-employed mortgage deals for you.
- Shop around. Speaking to a mortgage broker is the easiest and quickest way to find the best mortgage for you.
- Gather the documents you need for your application – Your broker will explain what you need.
- Get your mortgage in principle: This is an indication that a lender could lend you a specified amount, based on details you’ve provided about your income, spending and debts. With mortgage brokers Mortgage Advice Bureau, you can get a personalised Mortgage in Principle today. Find out more in our Mortgage in principle guide.
- Apply for your mortgage. Read our guide on How to make a successful mortgage application
The best mortgage depends on your personal circumstances. The award-winning expert advisers at Mortgage Advice Bureau will find the right mortgage for you.
Need mortgage advice?
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Get mortgage advice now
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
Remortgaging when you’re self-employed
- Remortgaging when you’re self-employed works in a similar way to if you’re employed.
- If your current mortgage deal ends in the next six months, you can start the remortgage process now and lock in a rate.
- You can then keep it under review in case a better rate comes up before you complete your switch. Read our guide Should I remortgage now?
Which lenders offer self-employed mortgages?
Many mainstream mortgage lenders offer self-employed mortgages although each has its own lending criteria. For example:
- Nationwide self-employed mortgage requirements include self-employed applicants needing a minimum trading period of 2 years. For sole traders and partnerships, you’ll need to provide the last 2 years’ income and the lender will use the lower of the most recent year’s net profit (or share of), or the average of the last 2 years’ net profit (or share of) figures.
- Halifax self-employed mortgage requirements. While the lender asks for evidence of the last 2 years Tax Calculations and corresponding Tax Year Overviews or Last 2 years finalised accounts, they also say ‘Where the customer has been trading for less than 2 years, a minimum of 1 year’s accounts will be considered. Latest 3 months’ bank statements for the account which is used for business purposes may be required.’
- NatWest self-employed mortgage requirements For sole traders or partnerships, NatWest’s lending criteria includes evidence of 2 years SA100 (Tax Return) OR Full and Finalised accounts, 2 years SA302 Tax Calculation and Tax year overview, 3 months Personal Bank statements and 3 months Business Bank statements, if applicable.
How to find a self-employed mortgage adviser
If you’re looking for a self-employed mortgage adviser, get fee-free advice from our award-winning partners Mortgage Advice Bureau.
Need mortgage advice?
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Get mortgage advice now
Frequently Asked Questions
Can I get a 95% self-employed mortgage?
It may be possible to get a 95% self-employed mortgage but this will depend on your circumstances so it’s a good idea to chat it through with a mortgage broker.
Can I buy through a shared ownership scheme if I’m self-employed?
How many years do I need to be self-employed to get a mortgage?
Most lenders require you to have at least two years of accounts to offer you a self-employed mortgage, but some lenders may accept less so it’s a good idea to speak to a fee-free mortgage broker to find out your options if you’ve been self-employed for a shorter period.
Can I still get a self-certification mortgage?
No. Self-certification, or self-cert, mortgages, which allowed self-employed people in the UK to self-certify how much they earned without needing to provide evidence, were banned in 2014 because of concerns that people were getting mortgages they couldn’t afford.
How long does it take to get a mortgage offer?
It normally takes between 2-4 weeks to get a mortgage offer. But if your case is more complex, it may take longer to get an offer. Find out more in our guide on How long does it take to get a mortgage?
Will being on maternity leave affect my self-employed mortgage application?
Being on maternity leave in the run up to an application can have an impact because lenders may want to know if you being on maternity leave will affect the income of your business. If you’re making a joint application with someone else it may have less of an impact, especially if they have a regular income. But it’s advisable to speak to a mortgage broker for expert advice tailored to your personal circumstances.
Can you get a self-employed Buy to Let mortgage?
It is possible to get a Buy to Let mortgage if you’re self-employed but it will depend on your circumstances. The amount you can borrow on a Buy to Let mortgage depends on the property’s rental potential, rather than your income. But many lenders do have minimum income criteria as well, so your self-employed income may be taken into account. It’s advisable to get fee-free advice from a mortgage broker as they’ll be able to explain your Buy to Let mortgage options if you’re self-employed.
Can I get a guarantor mortgage if I’m self-employed?
If you’re self-employed, you may be able to get a guarantor mortgage, which is when a loved one takes on some of the risk of the mortgage by putting up their savings or property as security. Find out more in our guide on Guarantor mortgages explained. However, whether or not you’ll be able to get a self-employed guarantor mortgage will depend on your circumstances.
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