Why is it so hard to get a mortgage when you are self-employed?

While we do use the phrase “self-employed mortgage”, there are no specific mortgage products available purely for the self-employed people.

In theory, self-employed people have access to the same lenders and the same mortgage products as those who are employed. So, if you are self-employed, you will go through the same underwriting process and affordability tests as any other borrower. However, you will be required to provide more evidence of your earnings than those who are employed. This is because self-employed income is typically less predictable than those who are salaried and lenders need to ensure that you can afford your mortgage.

Lenders will see you as self-employed if you are:

- Contractor (fixed-term or short-term renewable)

- Sole trader

- Company director with more than 20%-25% shares

- Company shareholder with more than 20%-25% shares

- Partners in an ordinary, limited or limited liability partnerships

Lenders have different requirements when underwriting mortgages for the self-employed. To consider your application they will typically ask for at least two years of accounts, but some lenders may want to see how much you earned and how your business performed in the last three years.

Some lenders take income and dividends into account when calculating mortgage affordability while other use income and net profit. While some lenders use average figures over the last two or three years, a small number of lenders might use your latest figures. But what all lenders want to see is that your business is growing, and your turnover and net profit is rising. If you work as a contractor, then lenders would ask you to show evidence of your current contract, your contracting history and some information about your future clients and upcoming contracts.

So, what do you need to do to make sure you can get your mortgage? The best tip we can give you is getting prepared well in advance. Preparation is always very important when applying for a mortgage, regardless of your working status. But it is especially important for those, who are self-employed. Which is why we encourage our clients to talk to us well in advance so we can help them get prepared.

Do you plan to buy a property or re-mortgage your home soon? Give us a call, let us help you on your mortgage journey.

Are you looking to secure a self-employed mortgage? Speak to one of our advisers.