Self Employed Mortgages

self employed

To obtain a self employed mortgage you will need the following

  • SA302s – statement from HMRC of the details of your self assessment tax return
  • Tax Year Overviews – statement from HMRC of the tax paid against your self employed income
  • Three years figures will work for all Lenders, Two years for some, One year for a few
  • Company Directors may need to provide full business accounts to obtain a self employed mortgage

Important facts for self employed mortgage applicants

  • Your business must be in profit
  • Most lenders will average your income over 3 years
  • Lenders are not interested in turnover – trading profit is key
  • Some lenders will work from latest trading figures only
  • Company Directors don’t need to draw the profit to have it considered
  • Some self employed mortgage lenders will work from an Accountants reference and not require SA302s

Why the self employed should use a mortgage broker

Because of the wide variation of circumstances for self employed mortgage applicants, and the massive variations in how mortgage lenders treat the self employed, you need someone with experience and expansive knowledge to handle your application successfully.

How we assist with Self-employed mortgages

We specialise in helping the self-employed obtain mortgage funding.  Whether you are new in business or an old hand.
Sole Trader?  Partnership?  Limited Company?  We can assist.

Use our guides below to assess what you will require to obtain your mortgage as a self employed applicant.

Established business – PAYE Income

    Status – Your business can show over three years trading figures with regular,  healthy,  and increasing profit.

A limited company director is paid by PAYE at a level sufficient to support the mortgage with ownership of over 25% of the business.

An applicant trading as a partnership has a sizeable share of the business profit.

A sole trader has SA302 tax returns covering three years to confirm income.

Likely Result – assuming clean credit record

Many mortgage lenders will welcome your application and underwriting should not prove too difficult.

Why you should apply through an independent mortgage broker

An experienced independent mortgage broker will know which Lenders are offering the best and most suitable product options for you and will save you time and money.

Established self employed – provable profit

    Status – Your business can show at least three years trading figures with regular,  healthy,  sustained or increasing profit.

A limited company director is paid by PAYE at a level sufficient to support the mortgage with ownership of over 25% of the business or receives PAYE and dividends at a level that can be supported by the business profit.

An applicant trading as a partnership has sizeable share of the business profit.

A sole trader has SA302 tax returns covering three years to confirm income.

Likely Result – assuming clean credit record

Most mortgage lenders will welcome your application and provided a suitable lender is selected underwriting should not prove too difficult.

Why you should apply through an independent mortgage broker

An experienced independent mortgage broker will know which Lenders will accept your application and which are offering the best and most suitable product options for you.

This will save you time,  money,  and stress.

Self employed – Established business – low PAYE, mainly dividends

    Status – established business.

Your business can show at least three years trading figures with regular,  healthy,  sustained or increasing profit.

A limited company director is paid by PAYE at a nominal level and receives the bulk of their income from the business as dividends.  The applicant has ownership of over 25% of the business.

Income received can be supported by the business profit.

An applicant trading as a partnership has sizeable share of the business profit.

A sole trader has SA302 tax returns covering three years to confirm income.

Likely Result – assuming clean credit record

A number of mortgage lenders will welcome your application and provided a suitable lender is selected underwriting should be possible.  Some lenders will not consider your dividend income.

Why you should apply through an independent mortgage broker

An experienced independent mortgage broker will know which Lenders will accept your application given the way you are paid from the business and which are offering the best and most suitable product options for you.  This will save you time,  money and stress.

New as self employed – provable profit

    Status – two years self employed trading – good trading figures.

Your business can show at least two years trading figures with sustained or increasing profit.

A limited company director is paid by PAYE at a nominal level and receives the bulk of their income from the business as dividends.  Or the business is trading profitably and the directors have chosen to retain profit within the business.

An applicant trading as a partnership has sizeable share of the business profit.

A sole trader has SA302 tax returns covering two years to confirm income.

Likely Result – assuming clean credit record

Underwriting should be possible but the list of potential lenders is very limited.

Why you should apply through an independent mortgage broker

Using an experienced independent mortgage broker is the only sensible way to expect to be successful with this mortgage application.

Newly self employed – not yet in profit

    Status – trading self employed under 24 months.

Your business has been trading less than 24 months but you can show one year’s trading figures,  good cash-flow,  and the potential for profit going forward.

A limited company director cannot show strong current paye or dividend income.

There is limited trading profit provable with a Partnership.

A sole trader has one SA302 tax return showing minimal profit.

Likely Result – assuming clean credit record

Underwriting will be very difficult and your application needs to go to a specialised lending source.
Unless your business is realistically capable of evidencing potential for strong further profits you are unlikely to be successful.

Why you should apply through an independent mortgage broker

You need to use experienced independent mortgage such as A Mortgage Now which has the experience and lending contacts needed in this area.

Self Employed – Bad credit history

    Status – good self employed profit – poor credit file.

You are self-employed and can prove profit over three years but have a blemish on your credit record such as a default,  or CCJ.

Limited company directors can provide three years accounts showing sensible profit.

Owners of Partnerships can show three years SA302 self-assessment returns.

Sole traders can show three years SA302 self-assessment returns.

Likely Result

Lending may be possible through selected channels – each case will be assessed on its own merit.  Expect to put down a larger deposit and pay a higher interest rate.

Why you should apply through an independent mortgage broker

You will need an experienced independent mortgage broker to handle your case as this is the only way you can access the specialist Lenders you need.

Self-employment and arranging a mortgage

One of the most difficult areas when arranging mortgages for clients in today’s market is helping Self- Employed applicants.  This is particularly the case since the withdrawal of self-certified mortgages from the market.

The 7 minute mortgage
It takes just 7 minutes to complete our secure online mortgage request form

The rise of the SA302

Lenders have taken to using the HMRC SA302 form as evidence of income to underwrite self-employed mortgages.  If you are self-employed you may find that arranging a mortgage or re-mortgage is more complex than you expected.  This is due to the differing attitudes of Lenders to trading styles and methods of drawing personal income.

For this reason we suggest you always seek advice from an Independent Mortgage Broker when arranging a mortgage as a self-employed applicant.

Where the Self-Employed applicant has three years accounts that show a suitable net profit  (after business expenses),  matters may progress fairly smoothly.  The difficulties arise when the Mortgage applicant is running a start-up business and has been trading for less than three years.  They may show minimal or no profit despite good turnover and bright prospects for the business in the years ahead.

Sole Traders, Partnerships, Limited Companies?

Self-Employed mortgage applications are further complicated by the various ways in which the Self-Employed trade.  Sole Traders,  Partnerships,  and Limited Company Directors are all treated differently by Lenders when underwriting mortgages.  Add to the mix Limited Liability Partnerships and zero equity Partners,  and you have a recipe for complication and disappointment if your Self-Employed Mortgage Application is not handled by an experienced Independent Mortgage Broker.

Self Cert Mortgages

Self cert or self-certified mortgages were the solution up until 2009 when the mortgage market lost it’s appetite for offering them.

Under a self cert mortgage,  the Lender would rely on credit score and deposit to manage their risk.  This was very effective for the Self-Employed applicant who was building a good business but could not support their mortgage application with accounts.  The problem came when applications started to come in from applicants who were running failing or unprofitable businesses.

In short,  the concept of self-certified mortgages was sound – the implementation of them was flawed.

Today’s Self-Employed Mortgage solution

Have spoken to many Lenders on this issue over the past four years we now have an exclusive Self-Employed Mortgage product that provides a unique opportunity for our newly Self-Employed applicants to raise mortgage funds with limited accounts.

We can now offer mortgages for the Self-Employed with a minimum of just 12 months in business.

Click here to find out more about the Exclusive Self-Employed Mortgage

Service Reviewed - Mortgage Broker

From the moment we contacted A Mortgage Now, Colum and his team were very responsive and helpful in finding the right product for us. Colum was able to obtain and recommend a competitive product that suited our needs, and overcame any barriers that self-employment throws up with minimum fuss. After deciding on our new mortgage, Colum continued to chase and chivvy all those involved to ensure completion went through as soon as possible. I wouldn't hesitate to recommend A Mortgage Now.

5 stars out of 5

Service Reviewed - Mortgage Broker

Lawrence and his team at A Mortgage Now found myself and my partner an excellent mortgage deal. They helped us deal effectively with a rather dysfunctional bank, something which would have been very difficult to do without support from Lawrence.

5 stars out of 5

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