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Home » Mortgages » Self-Employment Mortgages

What is a self-employed mortgage?

There is actually no such thing as a self-employment mortgage. What the term refers to is a self-employed person applying for a mortgage, which they do just the same as everyone else in regular employment, with the same interest rates. 

The biggest difference when someone who is self-employed applies for a mortgage is that they will be asked for more proof and information to reassure lenders that they can make the monthly repayments.

 

How to get a mortgage if you’re self-employed

Your actual mortgage application won’t be any different from someone who’s in full-time employment. The main difference will be how your income is treated, and the amount of evidence you have to provide. Here’s a few things we recommend having ready when starting your mortgage application:

– Have all your documents ready – If you’re self-employed, you will need to provide accounts or tax returns that prove your income. Some lenders will ask for up to three years’ worth, although some providers may only require 12 months. The documents required include: proof of ID, proof of address, proof of earnings, bank statements, and proof of deposit.

– Download credit reports – Your credit score is a big factor that lenders will look at to determine whether you are reliable when it comes to making payments. Downloading your credit report in advance will allow you to check it is up-to-date and ensure you are prepared to challenge any inaccuracies. Use a service such as Experian and checkmyfile to access quickly and easily.

– Use a specialist broker – A mortgage broker who specialises in self-employed applicants will be able to fully understand your unique needs and situations, and will know exactly what you need to make your application go smoothly.


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Self-employed mortgage requirements

Here’s what you’ll need when you apply for a mortgage when you’re self-employed:

– Age limits – Of course, you need to be 18 years old to buy a property in the UK, but some lenders may impose age restrictions on their mortgage products when the applicant is self-employed. If the mortgage term goes beyond your 75th birthday, many lenders will be wary, although some will lend with no age limits.

– Proof of income – When you are self-employed, most lenders will want to see the past two or three years of accounts. The benefit of working with a specialist mortgage broker is that they can have access to deals and lenders that you won’t find elsewhere, some of which may have more lenient proof of income requirements.

– Proof of deposit – Deposit requirements for those who are self-employed are usually no different; the majority of lenders expect a minimum of 10%, but those who are considered a higher risk may be asked to put down more, for example, if you don’t have an extensive trading history.

– Credit history – Self-employed borrowers who have poor credit may find it more difficult to secure a mortgage, especially with traditional high street lenders. But, with the help of a specialist broker, it is possible to find a lender who will provide a bad credit mortgage.

How to find the right deal for you

Getting any kind of mortgage can be stressful enough. Working with a specialist mortgage broker can help you get access to unique deals, as well as expert advice.

Self-Employed FAQs

Can I get a mortgage if I’m self-employed?

Yes! Self-employed or small business owners can absolutely secure a mortgage. But getting on the property ladder and finding the right mortgage that suits your income and circumstances can sometimes be tricky. Lenders require proof that not only are the monthly repayments affordable, but that you will be able to make them in the future. Self-employed people present a higher risk when it comes to income, which can make lenders hesitant. 

What do lenders consider to be self-employed?

Banks and lenders will see you as self-employed if you own more than 20% to 25% of a business, if that is where you earn your main income. You could be listed as a contractor, sole trader, or director. 

What if I am newly self-employed?

In most cases, you will need to have at least nine to 12 months of trading under your belt before you are able to apply for a self-employed mortgage. Most lenders will want to see at least three years of trading history.

What is a self-certificate mortgage?

Self-certification mortgages allowed self-employed workers to declare their income without proof. Following the 2008 credit crunch, self-certification mortgages largely disappeared from the mortgage market. In 2014, they were banned by the Mortgage Market Review (MMR). 

Do self-employed borrowers pay higher interest rates?

As we’ve explained above, there is no special ‘type’ of mortgage for the self-employed. As long as you are able to provide enough detail and information into your monthly income, savings, and future work pipeline, then there is no reason why you shouldn’t have access to the same mortgage as a full-time employee. 

If your business was hit by the COVID-19 pandemic, or perhaps you don’t have as much information detailing your finances as high street lenders would like, using a specialist mortgage broker can really open up your options. Here at Mortgage Experience, our brokers work to find the best deal to suit your circumstances, and will be able to access exclusive deals you won’t find elsewhere.

A personal approach to your mortgage

With a Mortgage Experience adviser on your team, you can sit back and relaxed, safe in the knowledge that we will be doing all the heavy lifting to find you a suitable self-employed mortgage. This gives you more time to do the other important things in life.

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