Self Employed Remortgage

If your fixed-rate term is coming to an end, you might be thinking about remortgaging your property. When the fixed-rate term comes to an end, your lender may switch you to a standard variable rate mortgage. This means your mortgage repayments could go up or down every month. To avoid this, many people will remortgage and switch to another fixed rate term.

Self employed remortgage rules

If you are self-employed, remortgaging might not be as simple as for anyone else. To start with, self-employment comes in many different forms, and your employment status will impact the type of mortgage products you can access.

You could be the director of a company, own shares in a company, or you could be one of the many professionals that are classed as self-employed. Musicians, actors, freelancers and consultants are all classed as self-employed. If you aren’t sure, ask yourself this: do you fill in a self-assessment tax return? If you do, there is a good chance you will be classed as self-employed.

Anyone in this category will have to be aware of additional requirements when you begin a remortgage application. Even if you have only recently switched to self-employment, you will need to keep these things in mind before you can apply. As with anything in life, preparation is key. Here’s what you need to know to increase your chances of success with a self employed remortgage application.

Lenders are mainly concerned with affordability. They want to know that your monthly income is enough to cover your mortgage payments and additional expenses. For the self-employed, this can be more difficult to determine, as they don’t usually have a fixed salary.

Step one: prove your income

Most lenders will ask to see the last three years of financial accounts. Your end of year SA-302 forms are usually sufficient, but some lenders may ask to see a more detailed breakdown. You may wish to work with a chartered accountant to help you get this in order.

Step two: demonstrate future work

Past performance is not always a good indicator of future performance when it comes to freelance income. Lenders may ask to see evidence of future work contracts to prove that you have a steady stream of income.

Step three: work on your credit score

Lenders look at your credit score to determine if you have been good with money in the past. Pay down your debts, keep your credit usage under 25% of the total limit, and try to avoid missing any payments. You can read more about improving your credit score here.

Work with a mortgage broker

To increase your chances of success, always work with a mortgage broker to help you find and secure the best deal. They will know which lenders are most likely to accept your application, reducing the chance of your application being rejected.

Is it harder to remortgage when you are self-employed?

Being self-employed should not stop you from securing a mortgage. There might be a lot of horror stories about how difficult it is for the self-employed, but don’t let this hold you back.

If you have moved to self-employment since securing your mortgage, working with a specialist broker will help you to navigate this field.

If you were self-employed when you first secured your mortgage, the process of remortgaging will be very similar. Head to our self-employed hub to find out more.

How to Get a Mortgage When Self Employed - Complete Guide

How to Get a Mortgage When Self Employed

There are many perks to being self-employed, but an easier route to mortgages is not one of them. Before the 2008 financial crash, the self-employed could access something known as self-certified mortgages. This would allow them to state their earnings and the banks would trust that this amount was correct. Unfortunately, this led to many people overstating their earnings, borrowing too much, and then being unable to pay it back.

This type of mortgage is now banned in the UK, and lenders now implement strict checks on earnings. This means that the self-employed typically have to jump through far more hoops than any other type of borrower.

While it might be more stressful, it certainly isn’t impossible to achieve. Many people secure a self employed mortgage every year. And once you have passed the affordability checks, you will have access to all the same lending products. This means that you don’t need to worry about being charged higher interest rates just because you’re self-employed.

If you are self-employed and hoping to get on the property ladder soon, we’ve created this simple guide to help get you started. This will cover everything you need to know about preparing for the application and how you can act now to make things run more smoothly.

How to Get a Mortgage When Self Employed: the basics

First things first, you need to understand what lenders are looking for. Essentially, all lenders want to manage their risk, and they do this by being cautious about who they lend money to. 

They carry out affordability checks to make sure that you will be able to afford the payments every month, and then they also take into consideration your deposit. A larger deposit reduces the LTV, which reduces their risk.

In short, having a strong financial position and a healthy deposit can help to ensure that your mortgage application is approved. But remember, there are plenty of steps you will need to take before your dreams of homeownership become a reality.

For a full-time, salaried worker, this process of applying for a mortgage is quite simple. They can supply their employment contract, payslips and bank statements to prove that they have a steady income. But for the self-employed, this process isn’t so simple.

Being self-employed is considered a higher risk to lenders. Even though full-time employees still have the risk that they could be fired or made redundant at any moment, they are still considered lower risk than their self-employed counterparts.

Understanding how lenders will look at your application can help to put you in the right frame of mind when it comes to preparing your application, starting with your accounts.

Prepare your accounts

Prepare your accounts

In general, lenders will want to see between one and three years of accounts. Every lender will have their own rules for calculating how much you can afford to borrow based on your annual earnings figures. Some will take an average of the three, some will take your most recent annual earnings, and some will be extra cautious and only consider the lowest annual earnings figure.

Understanding how this will impact how much you can borrow and how much this borrowing will cost is essential. Some lenders will not even look at applications if you don’t have three years of accounts. Others will be more lenient, with some allowing you to apply with as little as one year of accounts. In this instance, they might be more stringent when checking your bank statements as they will want to see that your expenses are an accurate reflection of real life.

Calculating annual earnings (try our calculator)

Your annual earnings help the lender to calculate how much you can borrow. It will typically be between 4-5 times your annual income. It’s now easy to see why approaching the right lender can drastically change your mortgage prospects.

Imagine you have earned £15,000 in year one, £25,000 in year two and £40,000 in year three.

Lender one is willing to offer 4 times your average annual income over the past two years.

Lender two is willing to offer 5 times your most recent annual income.

And lender three is willing to offer 4 times your lowest annual income over the past three years.

Which one sounds like the best deal to you?

Lender one offers £130,000.

Lender two offers £200,000.

And lender three offers £60,000.

This is why it pays to shop around for the best lender and for one that understands your needs.

Proving your income

The simplest way to prove your annual income is through your SA302 form. This is an end-of-tax-year form that breaks down your tax liability. This is the simplest way for lenders to see how much income you have received from your work.

A problem that many freelancers face is that they have made legal adjustments to their accounts to minimise their tax liability. While this is completely legal, it can impact your ability to secure a mortgage, or it can impact the amount of money you can borrow.

If you’re thinking about purchasing a property, speak to an accountant before filing your next tax return, as they may be able to advise you on the best way to balance these conflicting interests. 

What’s important is that you are honest about your income and don’t try to inflate it to secure a larger mortgage. Mortgage providers and HMRC will compare notes to make sure the amount you state you earn accurately reflects what you are paying tax on.

Share your bank statements

Many lenders will ask to see the last three months of bank statements. They will scrutinise things like bill payments, your spending, and where you spend your money. Late payments, borrowing money and gambling sites will all be red flags for lenders. 

On the run-up to your mortgage application, keep your spending in check and don’t make any large luxury purchases. You need to show that your declared monthly expenses are accurate, as this will mean your proposed mortgage is affordable.

Check your credit score

During your mortgage application, the lender will look to your credit score for clues about your past behaviour with money. So if you have a shady history with high-interest store credit cards, expect this to be laid bare on your credit report.

Sprucing up your credit report is one of the best ways to ensure your application is accepted. This can mean something as simple as making sure you are on the electoral register at your current address. Or it might mean paying down your debt to keep it within 20-30% of the total limit.

You can check your credit score with all three credit reference agencies (Equifax, Experian and TransUnion) by joining Clearscore, Credit Karma and Experian. When you have all the information, you’ll know what you need to do to increase your chances of being accepted.

Does a poor credit score matter?

Unfortunately, yes, it does. A poor credit score in combination with other factors, such as a small deposit, could lead lenders to reject your application. As we mentioned above, lenders have to manage their risk, and sometimes a poor credit score can be a red flag for them.

The good news is that your credit score can be fixed with a few simple steps. Paying down your debt, making payments on time and getting registered at the right address on the electoral roll can all make a difference to your credit score in a matter of months.

Save a deposit

You’ll need to save a deposit before you can purchase a property. 100% mortgages are a thing of the past, so lenders will now want to see that you are willing to put something towards the purchase of the property. 

While it is possible to find 5% deposit mortgages, these are rare and more likely to be rejected. Instead, you should aim to save at least 15-20% of the value of the property. This will reduce the amount you need to borrow and make your application more attractive for lenders.

Boosting your deposit amount

There are government schemes available to help you purchase your first home. This includes shared ownership, equity loans and the help to buy ISA. Unfortunately, the help to buy ISA is closed to new applicants, but those who already have one open will be able to continue using this account to save and enjoy a government boost until 2029.

One of the easiest ways to boost your deposit amount without saving another penny is to set your sights on a lower-priced property. This could mean making some compromises on the area or the property finish. 

You could also look into shared ownership schemes which would allow you to purchase a percentage of the property and pay rent to a housing association on the remaining percentage. If your financial situation improves in the future, you would be able to increase your ownership share through a process known as “staircasing”.

A shared ownership scheme is a great way to get on the property ladder with a smaller deposit. After a few years when you have built up further equity in your home, you could either sell your share and use the deposit to move somewhere new, or you could increase your ownership share. You’ll be able to decorate the property as you like, but larger structural changes will need approval. There may also be rules on things like keeping a pet in the property.

Work with a mortgage broker

Navigating the mortgage market can be difficult for first-time buyers. As a self-employed, first-time buyer, you will benefit from the support of a mortgage broker. A mortgage broker can look at your situation and determine which lenders are most likely to accept your application. This can save you from being rejected and having to wait months to reapply.

A mortgage broker will be able to advise you on your application and how the current housing market will impact your search. They will also offer guidance on preparing your application to ensure you don’t make any easily avoidable mistakes. And finally, they can help to save you money on your lending products. 

Securing a mortgage at a lower interest rate can save you tens of thousands over the lifetime of a mortgage. So while a mortgage broker might be an additional expense, they will more than pay for themselves in the long term.

Apply for a mortgage in principle

Before you take the plunge with your real mortgage application, you can complete something known as a mortgage in principle or application in principle. This completes all of the soft checks and affordability calculations to give you the freedom to start looking at properties. If you find a home you would like to buy, you can put in an offer before completing the full mortgage application.

While there is the risk that your application could be rejected in the second round of checks, this is rare. If you are honest about your income and financial history, you stand a good chance of being accepted for a mortgage.

An application in principle allows you to start your property search with confidence. It will also allow the process to move much quicker, as you will have already completed many of the initial checks which can slow down a house purchase. The application in principle will last for 3 months, after which you will need to apply for another.

Find your dream property

Once you have found your dream home, you can put in an offer and wait. If the offer is accepted you can move forward with the complete application. Once a mortgage application is accepted, the sale can move into the next stages.

This is a very exciting time for first-time homeowners. As a self-employed applicant, it can often feel like the rug is about to be pulled out from under you. Remember to check all documents twice and get a second opinion if you are unsure how to move forward.

Mortgages for self employed with 1 years accounts

Self-employed individuals often have far greater control over their income. If they have a quiet month, they can market their skills or increase their prices. Full-time employees, on the other hand, would have to request a pay rise, and this could take months or even years to be accepted. Despite this increased control over their income, the self-employed often have a much tougher time trying to get a mortgage.

While a full-time employee only needs to be working for a company for 3-6 months to be considered, the self-employed need at least one years accounts in order to apply for a mortgage. All mortgage providers are different, and some will require up to 3 years of accounts before they can go ahead with a mortgage application.

Ultimately, this is to protect the lender and the borrower. Lenders want to make sure that the borrower is going to be able to continue making payments further down the line. As of December 2017, the following applicants would be eligible for a mortgage, subject to status.

  • Limited company directors trading for 12 months
  • Sole traders trading for 12 months
  • Established businesses recently limited
  • Contractors working for at least 12 months
  • Self-employed for 12 months with poor credit
  • A buy-to-let mortgage with no income
  • Up to 95% mortgage amount with help to buy scheme

It’s a common misconception that you need years and years of trading history in order to get a mortgage. If you’ve been refused a mortgage because you are self-employed, a sole trader or the director of a limited company, this might have more to do with the mortgage provider and nothing to do with your financial circumstances.

If you are serious about getting a mortgage, read on to find out about the ins and outs of mortgages for the self-employed, even if you only have one year of accounts.

Frequently asked questions about mortgages for the self-employed

To help answer many of your pressing questions, we’ve compiled this guide covering some of the most commonly asked questions about self-employed mortgages with 1 year’s accounts. Get in touch if you have any questions which aren’t answered on this page, or if you would like more information about how we can help.

  • How long do I need to be self-employed to get a mortgage?
  • Can I apply for a mortgage before I have 12 months of accounts?
  • How to get a mortgage with under 2 year’s of trading history
  • How much can I borrow?
  • Which occupations are acceptable for lenders?
  • Why am I having trouble getting a self-employed mortgage?
  • Which figures are most important for my mortgage application?
  • Can I get a mortgage when self-employed and with bad credit?

How long do I need to be self-employed

How long do I need to be self-employed to get a mortgage?

The majority of lenders, including most high-street lenders, will ask to see 3 year’s of accounts before you are eligible for a mortgage. However, there are mortgage providers that specialise in mortgages for the self-employed. These will consider 2 year’s of accounts when making a lending decision. They will often consider the average of the last 2 year’s of your income, if one is higher, or consider the most recent year if your income remains the same. A small number of mortgage providers will accept applications from the self-employed with just 12 months of accounts. You will need to work with a niche mortgage advisor in order to find out which lenders are most likely to accept your application.

Mortgage before I have 12 months of accounts

Can I apply for a mortgage before I have 12 months of accounts?

If you haven’t filed your first tax return yet, then it is unlikely that you will find a mortgage provider that is willing to accept your application. This is because mortgage providers use the figures from your tax return to verify your income. You wouldn’t lie about how much money you have earned, because this would mean that you owe more tax and have broken the law. So, lenders use tax returns as a way to verify your income.

If you are nearing the end of your first year of trading, you could, in theory, apply for a mortgage in principle. This is a statement from a mortgage provider that outlines how much they would be willing to lend you. They are valid for 3 months and are used by many people to help them put in an offer on a property with confidence. Once an offer has been accepted, your application will then be processed.

Having a mortgage in principle can allow you to start your search for a new property before the end of your first full year of trading. By the time comes to do your actual mortgage application, it’s likely that you will have your full 12 months of accounts.

Under 2 year’s of trading history

How to get a mortgage with under 2 year’s of trading history

Most mortgage providers will ask to see 2 years of accounts, but an increasing number of lenders are waking up to the idea that more and more people are heading down the self-employed route. Many lenders will now simply ask to see as much of your trading history as possible. If you were previously employed in a similar industry and drawing a regular wage, you could also use this in support of your application. If you have 20 months of trading, for example, the lender might also choose to make a project for the full 2 years based on the information provided.

How much can I borrow?

How much can I borrow?

Once you have been accepted by a mortgage provider, you will be treated the same as any other applicant. This means that you will be able to borrow the same amount as any other employee. The actual amount that you can borrow will be based on your income. It will usually be around 4x to 5x your annual income. If you are on a higher income, it’s possible that you may be able to stretch this further, provided you can prove that you can afford it.

The more accounts you can provide, the better, but in general, lenders will be on the cautious side unless you can demonstrate why they should increase the amount. If you have incomplete accounts for your second or third year, you may be able to use projections to show why you should be able to borrow more.

For example, if you net profit for the tax year ending in 2017 was 22,000 and your net profit for the first 9 months of 2018 was 25,000, then an accountant might be able to demonstrate why your earnings are likely to be higher. At an average rate of £2,770 per month for 2018, the full 12 months could be as high as £33,300 for the whole year.

A lender offering 5x annual income would offer a £166,000 mortgage on the projected amount or just a £110,000 for the first year of trading. This is a huge difference, so it’s worth investigating if your mortgage provider will consider projected income estimates. Income isn’t the only thing that your mortgage provider will consider.

Which occupations are acceptable for lenders

Which occupations are acceptable for lenders?

Lenders aren’t so too concerned with your occupation, provided the work is legal and that you create a tax return every year. Lenders are very flexible about who they lend to and are more concerned with determining affordability. It’s common for taxi drivers, plumbers, electricians and tradespeople, musicians, landlords, retailers, those running online businesses, professionals and investors to all be able to secure a mortgage. If you’re not sure if your occupation will be accepted, it’s best to speak to a mortgage provider to get clear answers before proceeding. In general, however, your actual occupation won’t be contested by a mortgage provider.

Trouble getting a self-employed mortgage?

Why am I having trouble getting a self-employed mortgage?

Prior to 2011, the self-employed could take advantage of self-cert mortgages. These allowed the self-employed to tell lenders how much they earn without providing any evidence. This type of mortgage helped many self-employed people to get on the property ladder. Unfortunately, they soon became known as the liar’s mortgage, as so many people inflated their income to be able to borrow more money. These mortgages were ultimately not affordable and many people lost their homes as a result.

In 2011, this type of mortgage was banned during the Mortgage Market Review. As a result, it’s now a lot more difficult for the self-employed to get mortgages as lenders now have to take more steps to ensure they are lending responsibly. While it is harder to secure a mortgage when self-employed, it isn’t impossible. If you are rejected by one lender this doesn’t mean that you cannot get a mortgage.

Figures most important for my mortgage application?

Which figures are most important for my mortgage application?

The majority of lenders will want to see your net profit for the past 12 months to three years. Many people forget that turnover is not the same thing as net profit. This is why most lenders will ask to see your SA302 statement in order to calculate how much you can borrow. The SA302 statement is your end of year tax statement which shows your income and tax liability for the year.

Some providers will also ask to see detailed accounts showing where your money is coming from and how often you get paid. These will often need to be drawn up by a qualified and chartered accountant using professional accounting software. Even if your accounts are handled by an accountant, it’s important that you have a solid understanding of your finances. This can be helpful in explaining things like seasonal fluctuations or spikes in your income.

If you are hoping to use projected income figures as part of your application, then it’s important that you can explain why your income is likely to increase or remain steady in the next few months and years. If you have recently secured a large contract, for example, this would be helpful in securing a higher mortgage amount.

Can I get a mortgage when self-employed and with bad credit?

Many people assume that it’s the end of the road if you have poor credit, but this couldn't be further from the truth. Even with a CCJ, some mortgage providers will still consider your application and the occasional late payment isn’t enough to make you ineligible for a mortgage.

As a general rule, applicants with poor credit will need a higher deposit, usually around 15% of the property value. CCJs and defaults more than 2 years old will also be ignored, even if the CCJ isn’t settled. Even missed or late payments on your credit accounts in the last 12 months won’t rule you out for a mortgage. Many lenders also disregard any issues with mobile phone companies.

If you are concerned about your credit report getting in the way of securing a mortgage, the best thing you can do is ensure you have a complete picture. There are three different credit agencies in the UK and you can access your records for free by signing up for free trials with Experian, UK Credit Ratings and Check My File.

Once you have a complete view of your credit profile, you can correct any mistakes, close dormant accounts and ensure everything is up-to-date. If you aren’t sure if your credit report is going to be an obstacle to getting a mortgage, then speak to a mortgage advisor who will be able to read between the lines of your report and identify the aspects which lenders look out for.


How can I improve my credit report in the eyes of lenders?

The way lenders interpret your credit score is not an exact science and they don’t generally publicise their approach. Your credit report is one part of a wider picture and it is used to get an idea of your past financial behaviour in order to determine if you are a low-risk borrower. Mortgage providers want to see that you make payments on time, so the worst thing you can do is stop using your credit facilities. They can’t see that you have a track record of making credit payments on time if you never use your credit card.

It’s also important to check your credit file regularly so that you can spot problems as they arise. It’s not uncommon for people to move house, fail to close their phone account properly and then end up with an open account that they have no idea about. This can quickly turn into a CCJ if the phone provider can’t reach you. By checking your credit report quickly, you can respond to issues like this in a timely manner before they become problematic for your credit application.

Can I get a help-to-buy mortgage when newly self-employed?

The number of lenders offering the attractive help-to-buy mortgage scheme to the self-employed is low, but they are out there. The help-to-buy scheme allows people to apply for a 95% mortgage with just a 5% deposit. It is intended to help people get on the property ladder who might otherwise struggle to save up a large deposit.

There are restrictions on the help-to-buy scheme and lenders will make much stricter checks. For the self-employed, this means that you will need to jump through yet more hoops in order to prove your eligibility. For example, if you have a CCJ of over £500 registered in the past 3 years, you won’t be eligible for a help-to-buy mortgage. You also can’t use the help-to-buy scheme for a home you intend to rent out (buy-to-let) or for a holiday home.

Can I remortgage my property with just one year’s accounts?

Remortgaging is often a similar process to securing to main purchase mortgage. You will need to prove that the repayments will be affordable and you will need to provide at least one year’s accounts in support of this. If you are thinking about remortgaging, it’s often best to return to the bank that supplied your first mortgage. They have a pre-existing financial relationship with you and may look more favourably on your application than a new mortgage provider would.

How do I increase my chances of getting a mortgage while self-employed?

Lenders will always look at the bigger picture, which includes factors such as your past financial behaviour, your current circumstances and commitments and the general affordability of your loan.

The simplest way to increase your chances of getting a mortgage is to secure a large deposit, usually around 15%. This helps to bring down the amount that you are borrowing. The next step is to clear up your credit report and ensure your accounts are all up to date. And finally, you should get your accounts in order so that you can prove your income. If you have been trying to keep your income down through legal methods in order to limit your tax liability, it’s important that you stop this or you could end up being able to borrow much less.

How to Get a Mortgage When You’re Self-Employed

You may have heard rumours that getting a mortgage when you’re self-employed is more difficult than it is for full-time salaried workers. While this may be true to some extent, but once you have jumped through the right hoops, you will have access to the same lending products as any other individual.

Mortgages for the self-employed are different because lenders can’t easily confirm your earnings. Since the entire mortgage approval process is about calculating the risk to the lender, self-employed earnings make it more difficult to assess.

With a full-time salaried employee, lenders can see their contract, payslips and bank statements as proof of income. With a self-employed person, their income may be more sporadic, increasing one month and falling the next. It’s also common for the self-employed to have income from more than one source. This makes things more difficult to assess for the lender.

If you’re self-employed and want to make your mortgage application easier, read on to discover the steps you need to make to get on the property ladder.

1. Get your accounts in order

Messy and complicated accounts is a surefire way to make lenders nervous. Split your personal and business spending by accounts, ensuring that you never use your business account for personal reasons, and vice versa. This will help lenders to get a more accurate picture of your spending habits.

2. File your tax return on time

Lenders will ask to see your SA302 statement as proof of income. This is a document provided by HMRC after you file your taxes that outlines your income and tax liability. It is the best possible proof of income you can provide and this is what will be used to determine affordability. If you are late filing your taxes, this will complicate the mortgage application process and could make you appear to be an unreliable borrower.

3. Stop reducing your tax liability

There are plenty of perfectly legal ways you can reduce your tax liability as a self-employed worker. While this might be good news for your tax bill, it can deliver a huge blow to your mortgage application. When you reduce your tax liability, you are essentially telling HMRC that you don’t earn as much money. But when lenders are looking at this figure to determine how much you can borrow, this can be disastrous and lead the bank to assume your freelance business is not as profitable as it really is. Speak to an accountant if you need help and guidance to get your accounts in order before your mortgage application.

4. Start saving a deposit

You can’t get on the property ladder without a deposit. And when you’re self-employed, you should aim to save as much as possible for your deposit. Your deposit helps to lower your LTV, or loan to value, which helps to lower the risk to the lender. This will allow you to access better mortgage products.

5. Explore help to buy schemes

The self-employed are also eligible for help to buy schemes, so you should check if there are any relevant to your circumstances. The help to buy equity loan scheme could allow you to boost a 5% deposit to a 25% deposit. Shared ownership is also a great way to get on the property ladder and start building your future. Even if you don’t own the full property, it’s a great way to start building equity.

6. Find a mortgage broker

Navigating the mortgage market alone is difficult enough when you’re a full-time salaried worker. When you’re self-employed, some of the big-name banks won’t even consider your application. This is why working with a mortgage broker can be so helpful. A mortgage broker will be able to build a profile of you and then match this to suitable lenders. While you might have to pay broker fees, you could save a lot of money in the long run by accessing a better lending product.

7. Check your credit score

With an unconventional income, one way that lenders can determine if you are a responsible borrower is by looking at your credit score. Your credit history is vital to securing a mortgage, so you should check that yours is up to date and free from errors before you apply. Make sure you don’t apply for any lines of credit at least 3 months before your mortgage application. An accepted application for credit will raise red flags just as much as a declined application.

8. Build evidence of future contracts

Depending on the kind of work you do, you might be able to build an attractive application by highlighting any future contracts you have lined up. Retained contracts will also have a similar impact on your application. This will allow you to show a record of consistent earnings, but also a bright future of potential earnings.

9. Get your spending in check

As part of the application process, lenders will often ask to see 6 months of bank statements. This will help them to get a better idea of your spending habits, so you must represent yourself in the best possible light. Some lenders will automatically reject your application if they see evidence of gambling on your bank statements. And some will call your application into question if your actual spending doesn’t match what you have stated on your application.

10. Get on the electoral roll

It might not be election season, but you should still make sure your address is up to date on the electoral roll. You should be able to check this when you check your credit report. The electoral roll is the simplest way for lenders to confirm your address. Without this essential step, lenders may have to resort to confirming your address through other avenues which can delay the application process unnecessarily. To avoid this fate, simply head to the HMRC website and add your details to the electoral roll. This may take up to eight weeks to show on your credit report, so make sure you do this step well in advance.

Self Employed Mortgage: How Much Can I Borrow?

Applying for a mortgage while self employed used to be a very simple process. The applicant could simply state their self employed income and then the lender would trust that this was true. Sadly, the self-cert mortgage was widely abused and many people were using this system to apply for more money than they could afford.

In 2011, the self-cert mortgage was banned. The self-employed now have to work a lot harder to prove their income for a mortgage. While this might seem unfair, all of these changes were made to protect the self employed.

While business might be booming on month, the nature of freelance work is such that the following month could be a lot quieter. With sporadic income, you may find that your mortgage is easily affordable one month and a strain on your finances the next.

To protect freelancers and the self employed, lenders now carry out strict affordability checks to ensure that your mortgage payments will remain affordable. With this in mind, let’s look at how mortgage affordability is calculated and what you can do to make this work for you.

How much can I borrow?

Most lenders will allow people to borrow between 4 times their annual income and 6 times their annual income. This will all depend on your individual circumstances. For example, newly qualified doctors may be able to access a higher multiple because their earnings are likely to increase a lot over the course of their professional life. 

What many self employed individuals find unfair is that they will need to provide evidence of their accounts for the past few years. The lender may then take an average of these annual earnings to estimate your future earnings. Or they might take the lowest annual earnings as their final figure. Even if your earnings are consistently growing, lenders will be reluctant to estimate your future earnings.

If you have been self employed for less than one year, you will need to work a specialist mortgage broker to find a lender that will help you to get the best possible deal.

How can I prove my income?

Most lenders will ask to see annual accounts from the past 2-3 years. This is often in the form of an SA302 form. This form is provided by HMRC and outlines your tax liability based on your self assessment tax return. If you work with an accountant, you could also ask them to prepare your accounts and confirm your income with your chosen lender.

When completing your self assessment tax return, it’s important to ensure that you are accurate and honest with your income. While you might want to minimise your tax bill, this annual income figure will be used to calculate how much you can borrow. 

What if I am the director of a limited company?

If you run a limited company, it’s important to find a mortgage provider that understands your income. Directors and partnerships will often have different income sources. This can include dividends and company retained profits.

All of these different income sources will need to be factored in to your affordability calculations. If you don’t work with the right lender, then you could end up being offered a multiple of your basic monthly salary instead of a multiple of your total income.

Where can I go for advice?

At Niche Mortgage Info, we connect individuals with the right mortgage broker for their needs. This website is a great place to start to find out more about self employed mortgages. And if you’re ready to start your journey, we can connect you with a broker who fully understands your needs.

How To Qualify For A Mortgage If You're Self-Employed - 2020

The self employed sector is booming. More and more people are choosing to break free from the chains of conventional employment and build their own business. While this might save you from the dreaded commute and give you the freedom to be your own boss, it’s not without its downsides.

Securing credit is one of the things that gets a little bit harder when you’re self employed. And this includes mortgages. If you’re self employed and want to get on the property ladder in 2020, now is the time to start preparing. 

With a little preparation now, you could be ready to take steps towards being a homeowner in the new year. Read on to discover how to make sure you’ll qualify for a self employed mortgage in 2020.

Get your credit score in order

One of the first things that lenders will look at is your credit score. This helps them to determine if you are a high risk borrower. Your credit score gives them a snapshot of your current borrowing habits, and how well you repay your debts. No lending history can often be just as bad as poor lending history.

Sign up for a free trial with Checkmyfile to discover what the credit agencies already know about you. You can then fix problems with your file, start building your credit, or discover ways to boost your score. Even just being on the electoral register can help to boost your credit score.

Save a healthy deposit

By saving a larger deposit, you can reassure lenders that you are low risk. When you pay more up-front, you will be borrowing less of the full amount. This means that if you default on your mortgage payments, the lender will have less to recoup than if you had offered a smaller deposit.

As a self employed applicant, you can make sure you get access to better rates by offering a higher deposit amount. Aim for at least 10-15%, but 20% would be even better.

Clear old debts

When lenders look at your application, they want to see that the loan is currently affordable and that it will remain affordable in the future. This is one reason that old debts against your name can make it more difficult to secure a mortgage.

If you have other monthly obligations, such as an old credit card bill, then lenders might see this as something that could compete with your mortgage payments if your income were to go down. This is a bigger risk for the self employed as they are more likely to have irregular income.

Get your accounts in order

A person in full-time employment will only need to provide pay slips and a contract to prove their income. The self employed need to jump through quite a few more hoops. Most lenders will ask to see your accounts for a specific period, and this will vary between lenders.

If you are fairly lax with your accounting, now is the time to get everything up to date. If you don’t have a strong head for numbers, consider hiring an accountant. For a small monthly fee, they will manage your accounts and prepare your taxes. This can make it much easier to provide evidence of your income for a mortgage.

Be honest

When completing your taxes, it can be tempting to adjust your income to lessen your tax bill. While many of these changes are completely legal and encouraged in many self employed circles, this can impact your mortgage application. Always be honest about your income as the lender will use a multiple of your annual income to determine how much you can borrow.

Get a mortgage in principle

If you are keen to start the house hunt, you can apply for something known as a “mortgage in principle”. This is an agreement with your bank that says they will be willing to lend you a certain amount of money. You will need to pass their second round of checks in order to get the full mortgage.

This can be helpful as it allows you to start the house hunt process and then put in an offer if you find something that you like. If your offer is accepted, then you would return to the bank and complete the application process. This method is not without its risks, as you could be rejected further down the line, but it can be helpful to move the process forward.

Speak to the experts

Perhaps the best way to get yourself mortgage ready by 2020 is to find some expert advice. By working with a mortgage broker, you can find a lender that is accustomed to handling mortgages for self employed workers.

They will be able to give you advice on how to spruce up your credit score, how to get your accounts in order and how much deposit to save.

4 Deadly Mortgage Mistakes to Avoid If You're Self-Employed

Getting a mortgage is never easy, but when you’re self employed, it can feel like the odds are stacked against you. Gone are the days when you can waltz into a bank and request a self certify mortgage. This type of mortgage was phased out following the financial crash in 2007. You have to work a little harder to prove your income for a mortgage application.

Misconceptions around the self employed mortgage industry means that a lot of people put off getting a mortgage while they are self employed. Worse still, they make some of these incredible common mistakes. If you’re thinking about applying for a mortgage while self employed, make sure you don’t make these incredibly common mistakes.

Heading straight to your own bank

A lot of people assume that their own bank is the best place to start. After all, if you already have a relationship with the bank, you would assume they would be willing to work with you. But you could be missing out on a great deal if you head straight to your own bank. You also run the risk of your application being rejected. 

Not all high street lenders work well with the self employed, so it makes sense to shop around for the best deal. One of the best things you can do is approach a mortgage broker. A mortgage broker will be able to help you navigate the lenders and find a bank willing to offer mortgages for self employed workers. 

Adjusting your income

When tax season rolls around, many self employed individuals will make legal adjustments to their tax return in order to reduce their tax bill. If you are applying for a mortgage, most lenders will offer a multiple of your annual income as a maximum amount. If you have adjusted your income, this could be much lower than you can actually afford.

Make sure you are honest with your income and offer an accurate reflection of what you earn every year. But don’t be tempted to inflate your income as this can be just as disastrous. 

Changing your business structure

Many self employed people start out as a sole trader. When the time comes to apply for a mortgage, they look to strengthen their position. So they change their business structure to a limited company. A limited company should sound more impressive, but this is actually a huge mistake.

By changing your business structure, you are resetting the clock at zero. Your past accounts as a sole trader won’t count for anything, and your new business will have no accounts and no filing history. If you’re applying for a mortgage, leave your business structure alone.

Spending big before you apply

Many people will apply for a mortgage in principle before they submit their main application. This will give them time to look at properties, put in an offer, and then submit the full application. If you decide to do this, then don’t assume that anything is final until you’ve signed on the dotted line.

Many people relax once they have their mortgage in principle and decide to spend a little. This is usually in preparation for their big move. However, you should try to avoid any big spending sprees before you submit your final application. This can be a huge red flag to lenders and it could lead them to reject your application.

A rejected application will also show up on your record, which can make it difficult to secure a mortgage elsewhere. If you’re not sure what your credit file looks like, you can sign up for free with Checkmyfile

Getting a mortgage as a freelancer

Around 14.8% of the UK population is self-employed. With such a huge proportion of the population heading down the self-employed route, it’s important for mortgage providers to keep pace.

The self employed do not have simple and straightforward salaries, which can make it difficult for lenders to determine eligibility and calculate affordability. While it may be more complicated, more and more lenders are waking up to the idea that self-employed individuals are just as capable of paying back mortgages. If you’re a freelancer looking to get on the property ladder, read on to find out how to make this industry work for you.

How to get a freelancer mortgage

The important thing to remember is that there is no such thing as a “freelancer mortgage”. Instead, what you are looking for is a lender who will accept applications from freelancers. Once you have passed the application phase, the mortgage products are identical to salaried workers.

The easiest route to finding a mortgage provider who will accept your application is to speak to a specialist broker. We can help put you in touch with a mortgage broker who will be able to give you access to the full market, ensuring that you get the best possible deal.

Why is it harder for freelancers to get a mortgage?

Mortgage providers are primarily concerned with risk and affordability. If you can’t afford your mortgage repayments, then they might struggle to be able to recoup their money. This is why lenders ask borrowers to provide details of their income. For a salaried worker, this step is very simple. They simply provide their annual salary and then a breakdown of their monthly expenses. But for the self-employed, proving their income can be rather more difficult.

This is primarily because freelance income tends to fluctuate. You might earn a lot one month and not very much the next month. But over a whole year, you might earn more than your would in a 9-5 office job. To manage their risk, lenders will often ask to see multiple years of accounts for freelancers. This helps to offer some assurance than monthly fluctuations in income are not indicative of insecure income.

However, a rising number of specialist lenders mean that the industry is starting to catch up with new ways of working. While a traditional lender might ask for 3 years of accounts and a huge deposit, a growing number of lenders are relaxing these rules to make it easier for freelancers and the self-employed.

I’m a contractor, does this count as self-employed?

A huge problem faced by some workers is that their job isn’t clearly defined as ‘employed’ or ‘self-employed’. There is a grey for contractors which can make it difficult to get a mortgage. You could be self-employed, but only working for one client. In this case, should you apply as a freelancer or not? The simplest answer is this… if you take care of your own tax returns, then lenders will consider you to be self-employed. However, you may be able to use evidence of past contracts and contract renewals as further evidence of your income stability.

Few brokers have experience with freelancers

Not all brokers have experience working with freelancers, so it’s important to choose the right one. Whole of market means that they have access to all lenders, not that they have experience with all employment types. This is why it can be confusing for some freelancers.

Applying for a mortgage with the wrong lender can result in a rejected application. But don’t let this sway you. Another lender might be more than willing to work with you, so it makes sense to shop around and work with brokers who understand your needs. This is where Niche Mortgage Info comes in. We’re experienced in helping freelancers find the right broker for their needs.

How long do I need to be self-employed before I am eligible for a mortgage?

Lenders will take the length of time you have been running your own business as a key indicator of your financial stability. Many lenders will ask to see your accounts for the past 3 years, but some will consider 1-2 years. A very small number of lenders will be happy with 6 months of accounts.

If you have only recently switched to freelancing and you are experiencing fluctuating income, you may find it more difficult to secure a mortgage.

What if I form a partnership or limited company?

The way lenders calculate self employed income for mortgage applications will differ depending on whether you are a sole trader, limited company or partnership. For a sole trader, the majority will look at your net profit either before or after tax. For a limited company or partnership, the majority will look at your salary and dividends as proof of income. Some will also include your share of company retained profits to help boost your borrowing amount.

If you are self-employed as a sole trader, you will need to provide your SA302 forms as proof of annual income. If you form a limited company or partnership, you will need an accountant to provide evidence of your income.

What if I have a fixed term contract?

Some freelancers work on fixed term contracts, similar to that of salaried workers. Some lenders will accept this type of income, provided the contract has been renewed in the past or you have at least 6 months left on the contract.

If you have simply moved to a different working status but you have worked in similar roles in the past, lenders might be more willing to accept this as evidence of stable income. On a fixed term contract, your monthly income is more likely to be steady, which is an attractive feature for lenders.

How to calculate how much you can borrow

Once you have found a lender who is happy with your income and employment status, you will then need to work out how much you can afford to borrow.

Lenders will look at the following factors:

  • If you are a sole trader, lenders will look at your net profit, usually over the last 3 years. Some will take an average of the past 3 years and some will take the most recent year. 
  • If you are a limited company director, lenders will look at your salary and dividends as proof of income. Some lenders will also include your share of any retained profits, allowing you to borrow more.
  • If you are part of a contractor, lenders will either look at the contract value or the day rate. For a day rate calculation, they will calculate annual earnings by multiplying your day rate by 5 and then multiply this by the number of working weeks in a year.
  • If you are an employed worker, lenders will look at your basic salary plus any other forms of income. They might only accept a percentage of additional income, depending on how regular it is.

How is affordability calculated?

Affordability calculations are how lenders decide how much you can borrow. In general, it will be a multiple of your annual income. Some lenders will allow you to access 4x your annual income while others will lend you 6x your annual income. How you calculate income is therefore very important when determining how much you can borrow.

For example, a contractor with a day rate of £250 might be able to access between £230,000 and £345,000

How did we work this out?

Day Rate (£250) x 5 = £1250 x 46 (working weeks) = £57,500 annual salary.

4 x this salary would be £230,000 and 6 x this salary would be £345,000

This could mean the difference of £115,000 depending on which lender you approach.

Can I get a buy to let mortgage when freelancing?

Provided it is affordable, you should have no trouble securing a buy to let mortgage while freelancing. Some lenders will have minimum income requirements for buy to let mortgage which can range from £15,000 to £25,000. It can be more difficult for those on variable income to provide evidence that they meet this earnings threshold.

If you already own your own home, some lenders will consider you provided the rental income will be enough to cover the mortgage payments. If you don’t already own a property, then your application will be considered like any other mortgage application. You will not be able to use potential rental payments as proof of affordability.

This is because lenders are concerned that self employed borrowers would use a buy to let mortgage to sidestep the requirement to prove that a property is affordable. On the other hand, if you already have a portfolio of properties, it could be possible to secure a mortgage without providing any evidence of income.

Next steps

If you want to get on the property ladder as a self-employed individual, the first step is to get in touch with the right broker for your needs. We can help put you in touch with a wide range of brokers who are experienced in handling freelancer mortgage applications.

How much can I borrow being Self Employed

How much can I borrow?

Obtaining a mortgage when you’re classed as self employed can prove a little difficult now that the calculations can no longer be based on a self employed person’s declared income, as was the case with the now defunct paradigm of self-certification.

Since the 2011, the ‘self-cert’ mortgage has been banned in the UK, as there were fears that people were being offered borrowing that they couldn’t afford. Lenders in the modern day lenders in the mortgage market are required by law to ask for proof of income, as evidence of a self employed person’s ability to make the necessary payments.

Whilst the majority of lenders will ask for three years of business accounts as standard, specialist brokers are able to provide access to lenders that are able to be a little more flexible. The truth is, that operating for a minimum of three years is an indication that you’re able to afford a mortgage, but not a guarantee. Some lenders will consider applications with as little as 1 year of self assessment history. If you’re a director of a limited company then they may even consider lending based on your companies net profit. 

On the basis that you’ve been accepted for your mortgage the amount you’ll be able to borrow will be determined by the income details you’ve have been able to provide. Typically speaking, it will be equal to between 4 and 5 times your provable income.

For example, if you want to buy a house for £200k and have a 20% deposit to put down, you’ll need to show a self assessment income of £40k.

If you’d like more information on how to work out what you can afford, then speak to a specialist broker.

Self-employed net profit mortgages explained

When you’re self-employed, getting a mortgage can be more complicated than it is for those in more traditional employment. You might be worried that your lending options are more limited, After all, most lenders will be cautious of lending to those who work for themselves. However, it’s worth noting that some lenders will be more than happy to work with you, given the right circumstances.

If you are self-employed, a net profit mortgage is one way that you could get on the property ladder. In this blog post, we will explain what is involved with a net profit mortgage and how you could go about securing one.

What is a net profit mortgage?

A net profit mortgage is one where the lending decision rests on the net profit of your business. Whether you are a sole trader or a company director, you could be eligible for a net profit mortgage. Lenders will take one of two approaches to determining eligibility. 

Lenders will either look at the net profit before tax or after tax. This means that there can be huge discrepancies in the amount of money a lender is willing to offer. While some might reject an application based on post-tax profits, others might say yes to your application. This is why it is always worth shopping around when you are looking for a self-employed mortgage. Some mortgage brokers have vast experience dealing with net profit mortgages and this makes them ideally placed to offer advice and guidance.

If you need help navigating the world of net profit mortgages, make an enquiry with Niche Mortgage Info today and we’ll put you in touch with the best experts for your needs.

Am I eligible for a self employed mortgage based on net profit?

If you own you own business then mortgage providers will consider you to be self employed. This means that you generate profit rather than earn a salary. Your total income minus your business expenses is your net profit, and this is often the figure lenders will use to calculate affordability. You are eligible for a net profit mortgage if you are:

  • A freelancer or sole trader
  • Part of a partnership
  • A director in a limited company

In addition to meeting the requirements above, you will also need to satisfy the following requirements. Lenders will look at the following to make a lending decision.

  • How long your business has been trading
  • The amount of deposit you have saved
  • Your credit history
  • Your age at the time of application

How does the process differ for sole traders and company directors?

Sole traders and company directors will calculate their income in different ways. This means that lenders will be interested in different things depending on your self-employed status.

Net profit mortgages for sole traders

The main consideration for lenders will be fluctuations in your income. This is because they are mostly concerned with the affordability of the loan. For example, if they can see that your profit has increased year-on-year, then they may use the lower figure to calculate how much they will lend you to be cautious. Some lenders will take the most recent year’s profits to calculate affordability and others will take an average of the past few years.

In cases where your net profit has fallen, some lenders will not accept your application if your income has fallen by more than 20%. This is because it signals income instability and could indicate that you might not be able to keep up with future mortgage payments if your net profits were to fall again.

Net profit mortgages for company directors

Income for directors will be different to that of self employed individuals. If you are the director of a company, lenders will look at the salary and dividends you withdraw to calculate affordability. Some will also consider your share of the company retained profits, which can increase the amount you can afford to borrow.

How much deposit do I need to get a net profit mortgage?

There isn’t a set amount that you need to save as every lender will assess each mortgage application on its own merit. The amount of deposit you require will all depend on your personal circumstances and the level of risk. If you have a long trading history and a good credit history then you may be able to secure a mortgage with a smaller deposit.

As a general rule, the more deposit you can provide, the better rate you will be able to secure. By saving a larger deposit, you will be applying for a low LTV (loan-to-value). Aim for at least 15% of the property value and you should have access to a wide range of lending options.

Will a net profit mortgage calculator help me?

There are net profit mortgage calculators available which can help you work out how much deposit you need and how much you might be able to borrow. However, you should remember that these are only a rough indication and do not guarantee that a lender will accept your application or lend you that amount. Instead, you should rely on speaking to a specialist on the subject by getting in touch with Niche Mortgage Info today.

How much can I borrow with a net profit mortgage?

This will all vary depending on the lender. But there are several factors you can think about which will help you to determine how much you might be able to borrow. As a general rule, the higher the loan you want, the more evidence you will need to provide. For example, a loan of £500,000 will require more extensive trading history. If you’ve been trading for less than a year, you are unlikely to be eligible.

In addition to evidence of past earnings, some lenders may also ask to see evidence of future earnings. This could be in the form of contracts for future work or retainer contracts. Once you have satisfied the earnings portion of a mortgage application, you will have access to the same products as other applicants. Most lenders will offer a multiple of your income, usually around 4x, 4.5x or even 5x in some circumstances. 

How do I apply for a net profit mortgage?

Many people assume that self employed individuals have access to different mortgage products. This isn’t really the case. Instead, the mortgage application process is different, but once you have passed all of the checks, you have access to the same products. The first step to securing a net profit mortgage is to seek the advice of a broker with access to the full range of lenders. As you are looking for a niche mortgage product, it makes sense to shop around to make sure you get a good deal.

Before you apply for a net profit mortgage, you should think about the following factors:


Perhaps the most important thing to think about when looking for a mortgage is the affordability. You might feel confident that business is booming and you’ll easily be able to make the payments, but you need to be able to demonstrate why this is the case to your lender. Expect to be asked for copies of your tax returns to prove income. They may also want to see your accounts to see how regular your income is. And finally, they may want to see evidence of current and future contracts to determine the viability of your business.

How does bad credit affect a net profit mortgage?

Having poor credit history won’t necessarily rule you out of being able to secure a mortgage, but it can make it more expensive. Any kind of lending will become more difficult and more expensive when you have poor credit history. You will need to show that your current financial situation won’t hinder your ability to pay back your loan. You may also need to provide a larger deposit in order to minimise the risk to the lender. This could be as much as 20% in some cases, but again, this will all vary based on the lender.

Can I get a buy to let property with a net profit mortgage?

Provided you can meet the requirements set out by the lender, you should be able to get a mortgage for a buy to let property. In general, rates for buy to let properties are higher and you may also be asked to provide a larger deposit.

Why you should get expert advice for your net profit mortgage

Mortgage applications are complicated at the best of times and it can be difficult to know where to turn to for the best advice. Everyone is different, which means every mortgage application is different. The best place to start when thinking about a net profit mortgage for the self employed is to speak to a broker. Brokers are trained to know which lenders are more likely to accept an application based on an individual's circumstances. They will be able to open the door to niche and specialist lenders who you might not have previously considered.