Let's start by dispelling a myth; there are no such things as self-employed mortgages. Being self-employed means having access to exactly the same mortgages, rates, and underwriting processes as PAYE employees. Lenders will just require different information about your earnings, and your business and lenders may have slightly different employee criteria. What a lender may classify as self-employed does vary, but in most cases, you're employed if most of your income is through PAYE. If you are a sole trader, Partner or Company Director who takes dividends, then you are usually classed as self-employed.
How many months of bank statements do I need to provide when applying for a self-employed mortgage in the UK?
An employee normally has to provide 3 months' payslips and 3 months' personal bank statements. Whereas someone a lender considers self-employed will generally have to provide 3 years' worth of certified accounts or 3 years' worth of tax returns, specifically your SA302s. Being self-employed typically means providing 3 months' personal and business bank statements. A healthy deposit of at least 25% will be needed to get access to the best rates, although some lenders will offer rates with just a 5% deposit, even for self-employed borrowers.
How many years do I have to be self-employed to get a mortgage in the UK?
Lenders like to see a 3-year track record in your business. However, a few specialist lenders may consider just one-year trading, especially if the business you now run is closely associated with the job you did as an employee. How a lender arrives at the income figure they use to assess affordability varies too. Some will take an average across the last 3 years, some will take the lowest of the previous 3 years, and some may use the most recent year. It's imperative to engage a Mortgage Broker who knows how each lender assesses affordability to give you the best chance possible of securing the mortgage you need.
For example, suppose you are a contractor on an hourly or daily rate. In that case, most lenders will consider you self-employed even if you are paid via an Agency or Umbrella Company. But, again, the calculations used to ascertain income for affordability varies from lender to lender. Lenders will also consider how long you have been contracting and the industry in which you operate. Many lenders want to see that you have been contracting for at least a year. But a few specialist lenders will consider a new contractor, particularly where you are essentially performing the same job but just changing from PAYE to a contractor to increase your earning opportunity.
Is it more difficult to get a mortgage when self-employed?
In summary, there is more to getting a self-employed mortgage, but only because criteria vary from lender to lender. That's why using an independent Mortgage Broker is so important. An experienced broker will know and understand how each lender works and help you get the most appropriate mortgage deal for your circumstances. Moreover, a good broker will help you gather all the required documents, send what's needed directly to the lender, and manage everything through to completion.
Whether you are looking to make home improvements, pay off debt, restructure some financing, release equity, move home or buy a second home, there is normally always a mortgage option available if you are self-employed.
Don't hesitate to contact our friendly and experienced team if you want a self-employed mortgage or remortgage.
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