Being self-employed offers flexibility and independence, but when it comes to applying for a mortgage, many people worry it may make things more difficult. The good news is that being self-employed does not prevent you from getting a mortgage. However, lenders will usually require a little more information to assess your income and affordability.
Understanding how lenders assess self-employed applicants can help you prepare and improve your chances of success.
How Lenders Assess Self-Employed Income
When you are employed by a company, lenders typically look at payslips and employment contracts. For self-employed applicants, income can be less predictable, so lenders usually review financial records over a longer period.
Most lenders will want to see at least two years of accounts or tax returns to understand how stable your income has been. In some cases, one year may be acceptable, but this depends on the lender and the strength of your overall financial position.
Lenders often use documents such as:
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SA302 tax calculations
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Certified company accounts
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Business bank statements
These documents help demonstrate how your business performs and whether your income is sustainable.
Different Types of Self-Employed Applicants
Self-employed applicants can include a range of business structures, and lenders assess them slightly differently.
Sole traders are usually assessed based on their net profit.
Limited company directors may be assessed based on salary and dividends, although some lenders will consider retained profit.
Partnerships are typically assessed based on the applicant’s share of the business profits.
Because criteria vary between lenders, choosing the right lender can make a significant difference.
Affordability Still Matters
Just like any other mortgage application, lenders will also assess affordability. This means looking at income alongside regular outgoings, existing debts, and financial commitments.
Lenders also stress test mortgage repayments to make sure they would remain affordable if interest rates were to rise.
If you want to understand how this works in more detail, our guide to mortgage affordability checks explains what lenders look for when reviewing an application.
Can Self-Employed Applicants Still Get Competitive Mortgage Rates?
Yes, self-employed applicants can access many of the same mortgage products as employed borrowers. As long as income is well documented and affordability requirements are met, lenders will generally treat the application in a similar way.
The key is presenting your income clearly and choosing lenders whose criteria suit self-employed applicants.
How a Mortgage Adviser Can Help
Because lenders assess self-employed income differently, using a mortgage adviser can be particularly helpful. An adviser understands which lenders are more flexible and how to present financial information in the most suitable way.
At Worths Mortgage Advisers, we regularly help self-employed clients navigate the mortgage process, whether they are buying their first home, moving property, or reviewing their current mortgage.
If you are planning to review your existing deal, you may also find our guide to remortgages in Brentwood helpful when considering your options.
Call us today on 07880 722052 to arrange a free initial consultation.
Frequently Asked Questions
Do self-employed people find it harder to get a mortgage?
It can be slightly more complex because lenders need more information about income, but many self-employed applicants are approved for mortgages every year.
How many years of accounts do I need?
Most lenders prefer at least two years of accounts or tax returns, although some lenders may consider applications with one year, depending on the circumstances.
Can I get a mortgage if my income varies each year?
Yes. Lenders often average the income over the last two years to assess affordability.
Do self-employed applicants need a larger deposit?
Not necessarily. Deposit requirements are usually the same as for employed borrowers, although a larger deposit can improve the range of available mortgage deals.
