Getting a mortgage can seem a daunting and overwhelming process even if you financial status is relatively simple. So what about the self employed, whose income might fluctuate month to month and is often less predictable? Can they still get a mortgage?
Self Employed Mortgage Woes
It’s a natural concern when even making the decision to go self employed – how will it affect your ability to get a mortgage?
A mortgage application can be a little more complicated if you’re self employed but mostly just because it’s not as straightforward as simply listing your salary in most cases.
When you’re self employed, the following may well apply:
- Your income may vary month to month
- Your income may be highly unpredictable
- It may be more difficult for you to prove your income, particularly if it has changed significantly since your last tax return
- You may take your income as a combination of salary and dividends (if you’ve registered a limited company)
Is it possible to get a self employed mortgage?
Yes, you can get a mortgage if you’re self employed. But let’s just clear one thing up. There’s no such thing as a “self employed mortgage,” in the sense of a product specifically for those who are self employed. You’ll essentially be applying for one of the same products anyone would apply for, whether employed or self employed.
However, you may choose to seek advice from an adviser who specialises in working with the self employed. This is because declaring and proving your income might be more difficult for you depending upon circumstances than it would if you were employed.
What will you need to get a mortgage as someone who is self employed?
In order to successfully obtain a mortgage, you’re likely to require the following:
- A healthy mortgage deposit. Bear in mind that the higher the deposit you have as a proportion of the overall house price, the lower risk you’re likely to be considered (e.g. if you have a 20% deposit, you’re likely to be considered a lower risk than if you have a 10% deposit)
- 2 years of accounts (some lenders may request three). This is in order for the lender to get a clear picture of your earnings.
- A good record of the work you’ve been doing which can be used, in some cases, to help lenders to determine how secure your income is
- A reasonable credit score (different lenders have different minimum requirements in terms of credit history)
Can I get a self employed mortgage with just one year of accounts?
There may be some specialist lenders able to help you in the event that you only have one year of accounts. However, to give yourself broader options, having two years or more is better.
The more income history you have, the better.
How do I apply for a self employed mortgage?
We’re not mortgage experts. So we’d recommend a good first step is to speak to one. You could contact your bank or a local broker who will be able to offer advice specific to your situation.