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.