Self employed mortgages
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Last reviewed by John Fraser Tucker on 27 December 2023
There’s a common myth that it’s tough to get a mortgage when you’re self-employed.
But it's not.
Almost 5 million people work for themselves. Largely, they have the exact same access to mortgage deals as everyone else.
In fact, of all the mortgage applications we've submitted, self employed applicants are 96% as likely to get approved as anyone else.
What is a self employed mortgage?
There’s no specific self-employed mortgages, but you might hear them referred to as separate products because of the slight difference in the application process. The product you get is exactly the same.
Lender criteria can be a bit stricter for self-employed applicants, but some lenders are much more flexible than others with this type of income. Lenders that specialise in this type of mortgage, may therefore be seen to be offering ‘self-employed mortgages’.
Self-employed mortgage rates
The rates available to self-employed mortgage applicants are not going to be any different to those available on the market generally. However, it can be more difficult to get accepted for the most competitive rates in some circumstances - for example, if you’ve not been trading for very long.
Mojo Mortgages can help you to access the most competitive mortgage rates available to you, no matter what your self-employment type or broader circumstances. Speak to a broker today for a no obligation recommendation.
What is classed as self-employed for mortgage purposes?
Mortgage lenders generally class anyone who earns an income from other means than a direct employer, as self-employed. This means that limited company directors are self-employed for mortgage purposes, even though they usually aren’t by HMRC.
So if you work as a:
Sole trader
Freelancer
Contractor
Company director or partner with 20-25% ownership or more
you’re likely to be seen as self-employed by mortgage providers.
Getting a mortgage when you’re self employed
The only real difference is how lenders assess your income, and therefore how you prove your income to them.
Lenders work with self-employed borrowers in different ways, as they all have their own criteria and calculation methods. Usually, however, the type of self-employed income you earn will determine how they work out what you can borrow and what documentation you’ll need to provide.
How much can I borrow?
The fact that you’re self-employed in itself won’t impact how much you can borrow, as this is based on affordability. So long as you have a reliable income and are able to prove it, you should be able to borrow the same income multiple as other applicants.
Most lenders offer around 4.5 times your annual income, but this may be different for certain professions, based on your length of time trading, or on the level of income you have. High net worth individuals are usually able to secure higher borrowing - and successful business owners often fulfil this criteria.
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How is my income calculated?
This is where the major difference comes in. As you don’t earn a salary, lenders need to base your annual income on something in order to calculate the loan. Usually this is the average income across a set number of years. Most lenders like to use 3 year’s worth of earnings to form an average, but some accept 2 years, or even 12 months.
Things can be a little bit more complicated if you keep your salary deliberately low to avoid a large National Insurance and tax bill, as your income might look a lot lower than it is in reality.
However, some lenders will only look at dividends, whereas others will be willing to include retained profits. Equally, some lenders also accept additional income, such as bonuses or commission. We can help ensure you apply with a lender who will make the most of your self-employed income, no matter how complex.
How do I prove my income as a self-employed borrower?
It depends on your income type and how the lender you’re apply to calculates income, but usually:
Sole traders and freelancers will need
1-3 years of SA302 (tax calculations)
1-3 years of personal accounts - most lenders will want these to be ratified by a qualified accountants
Directors and partners
1-3 years of SA302s showing your personal income
Proof of dividends paid to yourself
For retained profits you’ll also need to provide net business profits tax records
If you’re a partner, only your percentage share of the net profits will be considered
Contractors
If you work on a day rate you’ll need to provide proof of that as well as contracts for the past 1-3 years
You may also need proof of ongoing and future contracts
CIS and umbrella company contractors are usually treated as employed for mortgage purposes, although not all lenders work this way
Is using an accountant essential for your mortgage application?
There are lenders that don’t require certified accounts as part of your mortgage application, so it’s not the end of the world if you don’t employ an accountant. However, it can be helpful to have the accounts you’re supplying as proof of income certified, as it may give you access to a wider pool of lenders.
What's an SA302 form and how do you get one?
The SA302 form is an official document from HMRC that shows your tax breakdown and earnings based on your Self Assessment tax returns.
You can find yours by logging into your HMRC online account:
Go to 'Self Assessment'
Go to 'More Self Assessment Details'
Click on 'Get your SA302 tax calculation'
Click the option to print your tax calculation
What if you have less than 2 years of SA302s or accounts?
The best way to approach a mortgage application in these circumstances is via an online mortgage broker, like ourselves, with experience of successfully arranging more complex self-employed mortgages. It will also help if you provide business plans and projected profits, alongside your proof of income documentation.
If the lender considers you to be higher risk, it’s likely you won't get the most competitive rate on the market, but it’s perfectly possible to secure a mortgage. However, by the time you remortgage, you should have enough accounting history (not to mention more equity) to look at better rates.
Can you remortgage if you’re self-employed?
Yes, of course. Although it can be a bit trickier if you’ve recently become self-employed, especially if your income has fallen since you took out the original mortgage. Although it may still be possible to get a product transfer with your existing lender in some circumstances.
If you’ve been self-employed all along, and your financial circumstances are the same or better, you should be able to remortgage more easily, as your equity should have increased.
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Self Employed Mortgages FAQs
No. It doesn't matter. When assessing your affordability, banks will just look at profit, not how you achieved it.
Yes, but you'll need to have the accounts and tax calculations (SA302). The lender will also want to be certain that your affordability doesn't depend on this extra income more than your full time job.
It depends on so many things. It's likely your LTV has gone down, which usually sees your rate fall, but you may have more unsecured debt now, more dependants, etc.
Solely based on your income amount, you may be offered a better rate, but that will depend on how long you have been working as a freelancer and if you can prove a stable income.
You can get an accurate idea of what remortgage rates you can get right now on the Mojo Mortgage Matcher.
It can make things more difficult, as both being self-employed and having poor credit are considered risk factors by most lenders, compared to an employed person with good credit, for example.
However, what lenders consider to be ‘bad credit’ is a spectrum that varies from one to the next. A broker like ourselves, therefore, is best placed to find you a suitable deal if you’re in niche circumstances such as these.
Yes you can, it doesn’t matter if how you earn your income differs from your partner.
You’ll need to provide different supporting information for your application, but ultimately it shouldn’t impact you, unless they are newly self-employed or unable to prove their income.
By nature of the industry, lots of buy-to-let mortgages are taken by self-employed individuals, as many will be landlords. If you earn or most of your income from property rental, then you’ll be classed as self-employed whether you trade independently or as a business.
Paying for an accountant’s certificate is often a standard part of the mortgage application process, especially for self-employed applicants or those with more complex income arrangements.
That's because lenders may ask for an accountant’s certificate to confirm your income to help them ensure everything is accurate and meets their affordability criteria. The certificate helps build trust between you and the lender by giving them an independent, professional validation of your income, which reduces their risk.
As preparing the certificate involves carefully reviewing your financial records and providing accurate, verified information to the lender, accountants are likely to charge for their time and expertise. The fee is typically a standard charge from the accountant for the service.