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Author: Carl Shave-Director
Updated on January 30th, 2024

Self-Employed Mortgages

The Mortgage Centres specialise in helping self-employed mortgage applicants obtain the mortgages they need. We have access to a wide range of lenders, from high street banks to specialist lending companies. Our brokers have a wealth of knowledge of how to assess your mortgage application.

Get in touch for a free initial, no-obligation discussion about your mortgage situation.

Do you qualify?

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What is a Self-Employed mortgage?

The term ‘self-employed’ covers many kinds of situations, from sole traders to contractors and those in company partnerships.

Different businesses will have different ways of distributing dividends and/or profits, and not everyone easily understands scenarios like retained profits and dividends, which we look at when considering your mortgage. Our specialist advisers will ensure all the income from your company is considered.

You may be relieved and surprised to know that there are no such things as specific ‘self-employed mortgages’.

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Fill out our quick and easy Self-employed calculator below. We only require a few details to see how much you may be able to borrow.

NO CREDIT CHECKS!

Self-employed mortgage requirements

Lenders generally base their self-employed mortgage criteria on historical earnings, rather than the amount you are currently earning right now. They will typically consider the average of your last two or three years’ income. As shown by your SA302 self-assessment tax calculation documents, or your full verified accounts.

We have found that one size does not fit all in our dealings across the many different modes of self-employment. Some lenders are more willing or able to help than others when considering applications.

There are a variety of circumstances you can be in and still obtain a self-employed mortgage. An example is when only one year’s accounts are available. Some other instances where we can be an effective mortgage broker for self-employed applicants are:

  • Calculations based on retained profit.
  • Working with accountant’s certificates.
  • Assessments made using only the latest year’s figures.
  • Understanding umbrella companies and freelancers.
  • Contractors where no accounts are required.

Getting a mortgage when self-employed

In recent years, mortgage lenders have been obliged to apply more stringent criteria to mortgage underwriting. Most take a more cautious and risk-averse approach when assessing affordability. This process can lead to a lot of frustration if you’re self-employed and applying for a mortgage.

However, there are many specialist mortgage lenders who are willing to lend to self-employed people. These lenders have a deep understanding of the market. This enables them to offer mortgages to a wide range of people, even those with complex income structures.

Proof of income for a self-employed mortgage

It’s essential that you have proof of income when applying for a self-employed mortgage. When your mortgage application is submitted, the lender will require proof as it’s one of the key factors in assessing your affordability. Some lenders can even verify income with HMRC instead of asking you directly to supply it.

Lenders verifying directly with HMRC is more of a practical move to save them time. It saves the lender from asking you for the information. Unfortunately, it does not mean they are really offering mortgages without proof of income.

Self-certified mortgages

Sadly, self-certification mortgages are no longer available in the UK. They were initially rolled out to make the process smoother for self-employed people with complex incomes. Self-certifying your income for the purposes of an affordability assessment was a big success.

After several years of operation, they discontinued self-cert mortgages. The mortgage regulator saw higher risks of defaults from those with complex incomes.

What is an SA302?

The SA302 form, provided by HMRC, confirms a self-employed mortgage applicant’s income. It details income sources, including self-employment and dividends. Lenders use it to meet FCA affordability rules. You can access up to four years of SA302s on HMRC’s website when submitting your return online.

You will need to request original SA302s from HMRC if:

  • You do not have access to a printer.
  • You are applying to a lender who will not accept self-printed forms.
  • You submit your tax returns by post.

You can contact the self-assessment helpline on 0300 200 3310, or you can write to them.

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Can I use dividend income to get a mortgage?

If you take a regular salary plus dividends, then lenders will consider the combined amount for their mortgage calculations. However, some lenders don’t work this way, and may look at your business’s net profit instead.

Complications only arise if the combined salary and dividends drawn are greater than your business’s net profit.

The best course of action is to speak to one of our advisers who can make sure your figures are correct.

Getting a mortgage with two year’s accounts

As mentioned, most mortgage lenders are known to request accounts from at least the last three years. Although, you are now able to get an application for a mortgage considered with two years’ accounts. The average profit is then considered across those years.

Mortgage lenders are likely to be more accommodating if you have a larger deposit or equity value.

Self-employed mortgage lenders

Self-employed mortgages come from regular lenders, but some are more open to self-employed applicants. In more recent years, we have seen many more lenders become accessible to the self-employed.

Even mainstream lenders have realised that creating too many barriers could affect their market share in the future. Lenders have varying criteria, so consult a specialist adviser for tailored advice.

Self-employed mortgage brokers

The Mortgage Centres have a huge level of experience  dealing with many niche areas of the mortgage market. We understand the intricacies of our self-employed clients’ lives. We know that every business will have a different trading strategy and take this into account in our assessments.

It’s very important to make a proper assessment of your circumstances. We will present your income and assets in such a way as to be most favourable to a potential mortgage lender.

What deposit do I need for a self-employed mortgage?

Before the financial crisis of 2008 and 2009, it was common for lenders to offer 100% mortgages. But, this is not the case anymore.

However, it is not all bad news. Nowadays, you need at least 5-10% of the property’s value. Although, the average deposit in the UK is around 20% as this is likely to get you a much more favourable term.

Mortgage products and bands

Aside from fulfilling a lender’s criteria, there are other good reasons to provide a larger deposit. Generally, the larger the deposit you provide, the better the mortgage deals you’ll be able to apply for. This is because most lenders have a range of slightly different mortgage products available, usually grouped into bands or tiers.

Here are some examples of the types of band or tiers you might have access too if you are self-employed:

  • 4.4% 5-year fixed rate for lending up to 75% LTV
  • 5.4% 5-year fixed rate for lending up to 80% LTV
  • 8.4% 5-year fixed rate for lending up to 85% LTV
  • 5.4% 5-year fixed rate for lending up to 90% LTV

You may find that by increasing your deposit amount by a few thousand pounds, it could bring you into a more favourable band. This could save you lots of money in the long run.

Self-Employed Mortgage FAQs

  • How much can I borrow for Self-employed mortgages?
  • Can I get a mortgage using retained profits?

The amount you can borrow can vary considerably depending on the lender. Each will have their own method of calculating your income. For example, some may simply use the latest year’s tax return as a guide, while others will take an average of the last two or three years’ figures.

Like with a standard mortgage, the larger your deposit and the higher your income, the more you can borrow. Try our self-employed mortgage calculator to gain an indication of how much you could borrow.

Using retained profits for a mortgage can be challenging. Mainstream lenders often don’t count them as income. While they consider dividend income alongside salary, profits left in your business are usually excluded.

However, specialist lenders do consider retained profits. Our brokers can provide a detailed assessment of your options.

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