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.