Sole traders and partnerships mortgages

Our specialist team of advisors have extensive experience arranging mortgages for sole traders who often come up against the following issues:

  • Had a significant increase in profit on their latest years figures
  • Only have one year’s trading figures
  • Have an accountant and need to obtain a mortgage with profit generated before the end of the tax year
  • Need to use your latest years trading figures.

If you are a sole trader facing any of these issues or dealing with a lender or broker who simply doesn’t understand your income enquire now to be put in contact with one of our specialist team

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Self-employed borrowers have access to exactly the same range of mortgage products as everyone else. The key factor for you to consider is being able to prove you have the income necessary to make the repayments on the mortgage for which you’re applying.

With so many people now being self-employed, many customers unfortunately get the wrong information when applying directly to banks, building societies or indeed via some of the less skilled mortgage brokers on the market.

As a sole trader, lenders will want to know your net profit, which will almost always need to be evidenced by an SA302 from HMRC (from your self-assessment) or a tax calculation from your accountant. Both need to be supported by a tax year overview from HMRC.

Most mortgage providers will require a history of trading (in some cases up to 3 years) and will take an average of these figures or, if your profits have decreased, will use the lowest.

A good mortgage adviser will be aware of these limitations and will consider finding you a provider that will accept the following when assessing a sole trader or partnership income:

  • 1 years trading
  • Latest years figures
  • Reference from a qualified accountant

There are certain traps that self-employed mortgage applicants need to be conscious of. Your accountant will see it as part of his job to minimise your tax liability by using legitimate methods to reduce your taxable income – however, that could count against you when applying for a mortgage as it may look as though you couldn’t afford the repayments.

There may be some variation around the deposit that’s required based on your credit rating and the lender. You may also be able to find a lender who would consider your application if you have one year of accounts plus a projection, but these are in the minority.

Some stricter lenders may want to see a prediction of your future clients or contracts, to make sure you can afford your mortgage repayments.

Our specialist advisers will assess your income to achieve the maximum you can borrow at the best interest rate available and will also speak directly to your accountant (if required) to obtain the correct figures.

As a mortgage is secured against your home/property it may be repossessed if you do not keep up the repayments.

Frequently Asked Questions

It’s a common misconception about the mortgage market that it’s now very difficult for self-employed people to get a mortgage. It’s true that the old self-certification mortgages are no longer available, however you do have access to the same variety of fixed and variable rate offers that all mortgage applicants have.

There are a handful of specialist lenders who offer products designed just for the self-employed. However, mainstream mortgage lenders do also lend to the self-employed and so you may not need to use a specialist. Let us help get the right mortgage for you.

Typically you’ll be required to have at least two year’s worth of accounts and/or tax returns to show to lenders – although some may require three years’ worth. We offer advice for 1 year’s accounts so get in touch to see how we can help you find a mortgage.

The amount you can borrow and the way it’s calculated depends on the lender, which is why it’s important to get professional advice so you can weigh up your options. Some lenders set the amount you can borrow based on your previous two or three years’ income, while others can calculate based on your previous year of trading.

If you are a director of a limited company, you may also be categorised as self-employed – depending on the lender and the share percentage you hold – approximately anything above 15-30% shareholding and you will be seen as self-employed in the eyes of a lender.

The same mortgages are available to you as any other employed applicant. The main difference between an application for a sole trader and any other applicant is the way your income is treated; it is important that your application is assessed correctly by your mortgage broker and that they apply to the correct lender for your circumstances.

As a sole trader your income is only based on your annual net profit, this is generally the figure which is submitted to HMRC after the end of the tax year in April but can sometimes be done at a different point in the year if you have an accountant.

Although some lenders will cap self-employed lending to 4.5 times your annual income, there are lenders who will go up to 5.5 times if you are a high earner. How much you can borrow will be determined by your annual net profit. Depending on your situation this can be taken from only 1 years documentation, an average of 2 years or your latest years figures.

No mortgage lender will base a sole trader application on the turnover of your business, the figure will always be your net profit which is the figure you pay tax on.

It shouldn’t be, as long as you have the correct documentation. A specialist mortgage advisor will make the process a lot easier as they will deal directly with the lenders on your behalf.

You will need your personal tax calculations which will show your profit from self-employment, these are sometimes referred to as your SA302’s. These documents are generally required to be no more than 18 months old and you will need 1 or 2 years of either of these documents.

A mortgage for a sole trader is assessed in the same way any other application is. The only real difference is that your income will be based on your annual net profit figure rather than any weekly or monthly income.