Applying for a mortgage can be a very daunting prospect, especially if you are self-employed. In this article, we have collaborated with the team at The Mortgage Genie and compiled some of the best tips to help you in your self-employed mortgage journey.

What counts as Self-employed to a Mortgage Provider?

It can be difficult to know what self-employed means to loan and mortgage providers. It means someone who regularly carries out a trade or business for themselves. This can be part time or full time, as a sole proprietor or as a contractor.

Mortgage providers will generally regard you as self-employed if you own more than 20% of a business.

Is it Difficult to get a Mortgage when you are Self-employed?

Unfortunately, it can be more difficult to get a mortgage if you are self-employed, but it is still possible! You just need to prove to your mortgage provider that you have a reliable source of income. This can be done in a variety of ways which we will cover later in this article.

Unfortunately, you can no longer get a self-certification mortgage. This allowed the self-employed to declare their income for the year without needing to provide evidence.

But don’t worry! Despite the fact that this avenue has closed, there are still ways in which you can get a mortgage.

Tip 1: Understand that more Documentation may be Required

In order to get a mortgage as a self-employed person, you will need to prove that you have a reliable income. Mortgage providers will ask you for:

  • 2 or more years of certified accounts
  • A tax year overview from HMRC
  • Evidence of past and upcoming contracts (if you are a contractor)
  • Dividend payments (if you are the company director)

Alongside this you will also be required to supply:

  • Your passport or driving license
  • 6 months bank statements
  • 3 months utility bills
  • Council tax bills

Make sure that you are also prepared to talk about expenses! Your mortgage provider may want to know how much you spend on childcare, holidays, loan repayments and travelling etc. They will want to know if you can afford the mortgage repayments alongside your other expenditure.

Tip 2: Make sure you are Financially Ready for a Mortgage

Of course this is important for all big decisions. But it is especially important for buying a home and even more so for people who are self-employed! Before you approach a mortgage provider you will need to check your credit score rating. There are a number of sites which will provide you with a free trial to check it.

You should also save up as much as possible for a deposit. This will improve your credit rating as well as get you a better rate on your mortgage payments.

Importantly, you should examine your finances and decide how much you are willing to spend on your mortgage payments and tailor your search for properties to those which fall in your price range.

Tip 3: Choose the Property you are going to Buy Wisely

Mortgage providers are always cautious of the properties they are providing for. Especially so with self-employed customers, as the risk is greater. Make sure that the property you want is appealing to a mortgage provider, for example make sure it is in good condition.

You should avoid properties which mortgage providers may not like such as:

  • Old buildings
  • Flats above shops
  • Properties with a lease of sub 90 years
  • Buildings constructed from unconventional building materials

This will better your chances of getting a mortgage.

Tip 4: Seek Specialist Advice

With most things money related and especially big decisions, it is important to seek specialist advice. Mortgage brokers and advisors will be able to give you more personalised advice and help you understand your own situation.

A big thank you to the team at The Mortgage Genie for all their information and advice! They are a very friendly bunch so if you are self-employed and have more questions about getting a mortgage, pay them a visit and they will be able to help you out.