Self-employed mortgage advice

Getting a mortgage when self-employed can present challenges. It might take some effort to find the right lender and save you time and money.

Self-employment often includes people like freelancers, contractors, and sole traders. It can also include limited company directors, individual partners and others earning from their own businesses, not fixed salaries.

In this guide we cover everything you need to know about self-employed mortgage requirements. You can also read our helpful article on the pros and cons of a self-employed mortgage.

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Author: Carl Shave - CEO and co-founder
Last updated: 21 Jun 2024

What is a self-employed mortgage?

Technically, there’s no exclusive “self-employed mortgage”. Good credit should grant equal access to mortgage rates. Lenders assess income and deposit for favourable deals. Different lenders have various income criteria, with some considering additional income sources.

If a lender sees you can make repayments and provide a substantial deposit, they’re more likely to offer you a good deal.

An introduction to Self-employed Mortgages

Self-employed topics

No matter your income, if you're self employed, contracting or a sole trader or partnership - we can help you.

Useful Information

Getting a self-employed mortgage

Lenders usually base their calculations for mortgage decisions on historical data rather than current or projected income.

It’s possible to obtain a mortgage for many different self-employed circumstances. This includes:

  • Using only one year’s accounts.
  • Basing figures on retained profit.
  • Working with accountant’s certificates.
  • Allowing for income via umbrella companies.
  • Rules for contractors who don’t need to worry about maintaining formal accounts.
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Can I get a self-employed mortgage without proof of income?

No, you will need to prove your income to lenders. The process may involve verifying income with HMRC. One of the key things that lenders need to assess is a potential applicant’s affordability.

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Are self-certified mortgages still available?

Self-certification mortgages are no longer accessible within the UK. Initially, they aimed self-cert mortgages at the self-employed with complex incomes.

Regulators ended self-cert mortgages because the default risk outweighed benefits for complex income individuals.

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What is an SA302?

An SA302 form is your Self-Assessment tax calculation, provided by HM Revenue & Customs. An SA302, based on your HMRC Self-Assessment tax return, details:

  • Income
  • Taxes
  • Rates for the year, including:
    • Salary
    • Self-employment income
    • Dividends
    • Interest

It’s common for lenders to accept SA302 forms instead of full accounts as proof of income for the self-employed.

Self-Employed Proof of Income

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How much can I borrow for a self-employed mortgage?

Lenders vary considerably in how they calculate an income figure for self-employed mortgage applicants. Some may use your income from the previous year. Others use an average of your income from the past two or three years.

Lenders have different criteria for considering direct income, salary, limited company director dividends, and retained profits. They employ various methods for income calculation, but once they establish it, standard lender criteria determine your borrowing limit.

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How do I get the right mortgage deal if I'm self-employed?

Lenders offer the same rates for both the employed and self-employed. Our mortgage advisors analyse all the products that are available to find the best deal for you. This involves reviewing initial and ongoing rates, lender fees, and other hidden costs or benefits linked to the mortgage offer.

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My bank declined me; can I still obtain a mortgage?

Being declined a mortgage by your bank is not an indication that you cannot get a mortgage. Every bank, building society and lending institution has its own criteria on which they lend on. They even assess a potential mortgage applicant’s credit score on their own internal scoring system.
If your bank declined your mortgage, consult a mortgage broker for assistance.

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Can I get a mortgage using retained profits?

Using retained business profits for a mortgage can be challenging. Most lenders calculate affordability based on salary and dividends.
Specialist lenders may consider retained profits, potentially increasing borrowing capacity.

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Can I use dividend income to get a mortgage?

Using dividend income for a mortgage is common. Most lenders combine salary and dividends. Complexities arise if drawings exceed company profit.

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Self-employed mortgages using last year’s accounts

Lenders differ in using self-employment income for mortgages. Traditionally, three years of net profit averages were common. Yet, some now consider recent higher profits if they’re sustainable.

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Can I get a self-employed mortgage with one year’s accounts?

Obtaining a self-employed mortgage with only one year of accounts is feasible. Previously, lenders typically required two to three years, but now one year suffices.

Lenders assessing self-employed mortgage criteria will look at the overall profile of the business accounts.

Getting a mortgage with 1one years’ worth of accounts

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Getting a mortgage with two years’ accounts

Some lenders may now consider an application if you have two years’ trading accounts and the associated tax calculations. Typically, lenders use the average of your two years’ net profit for mortgage calculations. Where there is a greater deposit or equity value, lenders are likely to be more accommodating.

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Lenders for self-employed are not distinct; they serve all applicants based on criteria. Self-employed income assessment varies among lenders. They use various parameters to assess self-employed mortgage applications, determining actual income from personal or business accounts.

Despite some lenders’ caution, self-employed individuals can access competitive mortgage deals with the proper financial presentation, credit history, and deposit.

At Just Mortgage Brokers, we secure exclusive deals through our strong lender relationships. Our self-employed mortgage brokers understand the complexities of self-employment. We’ll assess your unique situation, recommend the right lender and product, and ensure you explore specialist lenders for suitable deals. Contact us for a free consultation.

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Self-employed Mortgage FAQs

Yes, self-employed individuals can usually secure a Shared Ownership mortgage if they meet the lender’s specific requirements.

Securing a mortgage with a bad credit history can present a significant challenge. We specialise in this niche area of the market and can help you acquire a self-employed mortgage with bad credit.

Self-employed people typically do not face higher interest rates when applying for a mortgage. Lenders prioritise the applicant’s ability to repay the loan, regardless of employment type. However, assessing income for the self-employed can be more complex because of variable earnings. To secure a competitive interest rate:

  1. Strengthen your business case with signed contracts, verified accounts, and evidence of orders.
  2. Save for a larger deposit to reduce the lender’s risk.
  3. Maintain a clean credit history, checking for errors and using a credit card responsibly to build credit.

By presenting a strong application, you can secure a favourable mortgage rate.

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