What do you need to get a self-employed mortgage?
Whether you are operating as a Sole Trader, Limited company, Contractor, or Partnership and you are wanting to arrange your first mortgage or want to look at your remortgage options, on either your main residence or buy-to-let property, then look no further.
Our Resolute advisors specialise in self-employed income area and are here to answer any questions or concerns you may have.
We have access to a range of lenders from High Street banks, Building Societies to more specialist lending companies you won’t commonly see advertised.
With our knowledge and experience, we have an understanding of how your mortgage application will be assessed making our expertise in the self-employed market key to placing you with the right lender.
There is no such thing as a ‘Self Employed mortgage’, all that changes is the approach to the risk taken by the lenders in their assessment. We cannot say exactly what the deciding factors are when the lender completes their checks but the main areas they will assess you on is your income, expenditure, and credit scoring.
What do you need to get a self-employed mortgage?
Typically, lenders will assess your self-employed income on historical earnings, rather than the amount you are earning now.
This is usually worked out as an average over your last two or three years as shown by your SA302 Self-Assessment tax calculations documents or your Full Verified Accounts.
When it comes to any type of mortgage, one size definitely does not fit all, and with self-employment, some lenders are more willing than others when assessing your applications. In our experience, it is possible to obtain a mortgage for a self-employed person in a variety of circumstances by helping you find a lender whose underwriting criteria can accommodate your situation.
As a specialist mortgage advisor for the self-employed, our experts can help you find the most suitable self-employed mortgage on the market to meet your specific circumstances and requirements. Our years of experience have allowed us to gain knowledge and understanding of different lender criteria.
Sole Trader
As is just involved yourself as a sole trader, this is typically the simplest setup for a lender to understand and verify your income.
Limited Company Directors
A limited company director can still get a mortgage however, the setup is not as simple and can represent a more complicated structure. This does not mean you cannot proceed to gain a mortgage but there may be more evidence and questions asked by the lender.
Partnerships
If you are in a partnership, the rules have similar differences to that of a sole trader, except you are assessed on your individual share of net profit for your income.
Contractors
As a contractor, you can take advantage of specialist mortgages tailored to your unique income situation. Lenders have a different approach when it comes to assessing your income and contract setup.
Subcontractors / Construction Industry Scheme (C.I.S)
Under the Construction Industry Scheme, specialist lenders have different calculations and criteria on how to assess your income.
Zero Hours Contracts
Not always strictly self-employed but, with more people working under this type of contract, many lenders now offer specialist products to suit you.
Professionals
If you are a lender-defined professional, you may be entitled to specific products and different assessments when calculating your affordability. This is because professionals are referred to as low-risk.
Foster Carers
This can be difficult when looking to verify your income for a mortgage however, there are specialist lenders who will understand the complexities of a foster carer’s financials.
SA302 / Tax Calculation.
An SA302 form is a Self – Assessment tax calculation, sent to you by HM Revenue and Customs. This document verifies your self-employment income, and many lenders will ask for this when completing their underwriting checks. In most cases the latest 2 years SA302 are acceptable but in some circumstances, a lender may require 3 years.
Tax Year Overview
A Tax year overview (T.Y.O) is a document that runs alongside your SA302 as validation of the tax you have paid that year. A lender will require this at application stage as this confirms your SA302 and Tax Year Overview mirror the same information. These can be requested from HM Revenue and Customs. In most cases the latest 2 years SA302 are acceptable but in some circumstances, a lender may require 3 years.
Full Verified Company Accounts
Most lenders will work off the latest two years of Verified Accounts and take an average over the last two years to assess affordability. In some circumstances, if the latest year is lower than the previous year, an explanation will be required, and the lender may work off your latest year only and not take an average. The accounts will need to be verified by a chartered or certified accountant.
Dividend income can also be used when assessing your affordability. Each lender’s criteria varies as some will accept 100% of your dividend income combined with your salary, whereas others may only take a percentage of the dividend income.
Complications only arise if the combined salary and dividends drawn are greater than your business’s net profit, but the best course of action is to speak to one of our advisors who can make sure your figures are correct and match you with the most suitable mortgage lender.
Construction Industry Scheme CIS Payslips
Your contractor would have deducted your National Insurance and Tax on your behalf and submitted this to HM Revenue & Customs. Lenders tend to assess your latest Three or six months wage slips to calculate affordability. There may be further evidence required.
Personal Bank Statements
A lender will still require your latest three or six months’ personal bank statements to assess your income and expenditure.
Business Bank Statements
In some circumstances, a lender may request to see your latest three or six months business bank statements, if applicable. We and the lenders understand that not every self-employed role means you will have Business Bank Statements to evidence.