Why being self-employed can be a little more tricky getting a mortgage

As a self-employed person you need to be able to prove your income. Most lenders want to see a combination or one of the following - two years' of finalised accounts and/or tax returns.  The more proof of income you have the better. Having an accountant, a track record of work and a good credit history will go far in securing a loan.

Lenders typically base their calculations on the average profit from the last two years. Having a chartered accountant can be incredibly beneficial for you, as they handle much of the standard paperwork  lenders are looking for and provide assurance to the lender that all requirements will be met.

Contractors, the self-employed and business owners all have three main business structures to choose from, each of which will have a slightly different impact on how lenders view their income.

Sole Trader:  Keeping records is straightforward and as long as there is a certain amount of organisation, lenders will simply assess income based on the sole trader’s profits. Completing tax returns through self-assessment means HMRC calculates everything through their system, and the applicant will get a form called an SA302 showing total income and tax due. This form will be needed as part of the mortgage application.

Partnership:  If a person has set up a business in partnership with another individual and they are applying for a mortgage, lenders will take into account the income from the partner who is submitting the application.

Limited Company:  Limited companies mean the business income is separate from the applicant’s personal income. The company will have a director and, in most cases, a company secretary. Applicants will pay themselves a basic salary, topped up with dividend payments. Lenders will want to see the full picture when considering mortgage affordability.

We can play a key role in supporting you through the mortgage application process as a self-employed person. We know which lenders are more willing to lend to the self-employed, those who might accept less than two years' supporting paperwork and, of course, which lenders offer the best rates to suit your personal circumstances.   

Let Save On Mortgages  find the best self-employed mortgage solution for you!

Save On Mortgages can offer you expert advice, helping you prepare and be in a position to tick the right boxes. It's also knowing how to manage your income in a way that more easily secures a mortgage. Here are a few thoughts to bear in mind:

• Keep up-to-date records of all income and expenditure
• Hire an accountant
• Speak to a mortgage broker about all available options
• Avoid minimising income too much for tax purposes, as this can affect securing a mortgage.