How to get a mortgage when self-employed

Find out everything you need to know about getting a mortgage when you're self-employed.

Your home could be repossessed if you don't keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.

Can the self-employed get a mortgage?

It is possible to get a mortgage when you’re self-employed; however, it can be more difficult. The reason is that it can be harder to prove you have a reliable income.

Lenders need to be confident that you can afford to repay the mortgage before accepting your application. To do this, they carry out thorough affordability checks, which need to show you can afford the payments now and in the future.

Self-employed people can have unpredictable incomes, and it can be more complex to predict your future earnings. 

However, if you can provide evidence of several years of accounts, and you have healthy finances and a good credit score, you should be eligible for most mortgage products.

Who counts as self-employed for a mortgage?

Mortgage lenders will consider you a self-employed applicant if you own 20% or more of a business that pays your main income. This can include:

  • Sole traders, where you own and run your business by yourself

  • Directors or partners, where you own a business with others

  • Freelancers, where you’re hired to work for different companies

How a lender assesses your income will differ depending on whether you are a sole trader, director partner, or the owner of a limited company.

How to get a mortgage when self-employed

As a self-employed person, you can apply for the same mortgage products as anyone else. The only difference is how you satisfy the lender’s affordability criteria.

Employed applicants usually have to provide their past three payslips to prove their income; however, you’ll need to give much more evidence when you’re self-employed.

To prove your self-employed income, there are lots of documents you’ll need to provide, including:

  • At least two years of certified accounts

  • SA302 forms and tax year overviews

  • Between 3 and 6 months worth of bank statements

  • Proof of current and upcoming work/contracts

If possible, provide accounts that have been prepared by a chartered accountant. Lenders favour these as they can be more confident of their accuracy. As well as proving your income, you’ll also need to provide:

  • ID documents, including passport and driving licence

  • Proof of address, including utility bills or council tax statements

  • Statements for any savings or investments

How much can I borrow with a mortgage for the self-employed?

The lender will look at your income and the size of your deposit when working out how much you can borrow. 

As with employed borrowers, lenders can loan you up to 4.5 times your annual income; however, this will be based on your last few years of accounts rather than your annual salary.

Your affordability is also influenced by things like any outstanding loans, commitments like childcare costs and your general everyday spending.

Use our mortgage calculator to understand how much you can borrow. You’ll need to provide your annual income, deposit amount and regular outgoings to see what sort of mortgage you might qualify for.

What types of mortgage can I get when I’m self-employed?

There is no limit on the mortgage types you can qualify for when you’re self-employed, provided you can prove your income and meet the lender’s eligibility criteria. Mortgages you could get include:

Fixed-rate mortgages come with an interest rate that doesn’t change for a set period of time, typically two, three or five years. As the rate doesn’t change, neither will your monthly payments, making budgeting easier.

Every mortgage lender has its own standard variable rate (SVR), which is the rate you’re automatically moved to at the end of your initial deal term. It is set by your lender and is usually more expensive than other deals available.

Tracker mortgages are a type of variable-rate mortgage that changes in response to the Bank of England base rate. For example, if the tacker rate is 1% plus the base rate (currently 5.25%), the rate you pay will be 6.25%.

These are also variable-rate mortgages that offer a discount from the lender’s SVR. For example, if the discount rate is 1% below an SVR of 7%, you will pay a rate of 6%. That means your rate will change whenever the lender’s SVR moves.

If you’re looking to buy a property to rent out, you will need a buy-to-let mortgage. You will usually need a higher deposit for this type of mortgage, typically at least 25%.

How to improve your chances of getting a mortgage

Finding the best mortgage deal may require some additional effort when you are self-employed compared to traditionally employed. Lenders often scrutinise self-employed applicants more closely due to variable income and potential financial risks. 

Here are some steps to help you find the best mortgage deal:

  1. Organise your financial documents: Gather all necessary documents demonstrating your income and stability. These may include tax returns (both personal and business), bank statements, and any other relevant documents. Having organised and up-to-date records will help streamline the application process.

  2. Determine your affordability: Assess your financial situation and calculate how much you can afford to borrow. Consider your current income, expenses, and any potential fluctuations in your earnings. Lenders will want to ensure that you have sufficient income to cover mortgage payments.

  3. Build a strong credit history: Maintain a good credit score by paying bills on time, reducing existing debt, and avoiding new credit applications. A higher credit score will enhance your chances of securing favourable mortgage terms and interest rates.

  4. Research lenders: Shop around and research different lenders who offer mortgage deals suitable for self-employed individuals. Look for lenders experienced in working with self-employed applicants or those who specialise in flexible lending criteria.

  5. Seek professional advice: Consider using a mortgage broker or financial advisor experienced in dealing with self-employed individuals. They can provide personalised guidance and help you navigate the mortgage market more effectively.

  6. Demonstrate a consistent income pattern: Lenders prefer to see a consistent income pattern. If your income has been fluctuating, provide additional documentation or explanations to help the lender understand the reasons behind the fluctuations and show that your income is stable over time.

  7. Save for a larger deposit: A larger deposit can improve your chances of securing a better mortgage deal. Consider saving for a higher deposit to get access to more deals and reduce the amount you’ll need to borrow

  8. Be prepared for additional checks: As a self-employed applicant, lenders may conduct additional checks to verify your income and financial stability. Be prepared to provide further documentation or answer any queries they may have promptly.

Remember that the mortgage market is constantly changing, and it's important to stay up-to-date with current rates and offers. By being proactive, organised, and seeking professional advice when needed, you can increase your chances of finding the best mortgage deal as a self-employed individual.

Our expert says...

“Millions of people in the UK work for themselves, so you’re not alone when looking for a mortgage as a self-employed borrower. 

It’s true that there are a few more hoops to jump through, but if you can prove your income, there’s no reason you can’t find the right mortgage for you. Speak to one of our expert advisors to talk through all of your options.”

- Jon Bone \ CeMAP-qualified mortgage adviser

Self-employed mortgages FAQs

Most mortgage providers ask for at least two years' worth of accounts for your business when you apply for a mortgage. However, it’s possible to get a mortgage if you only have one year.

If you can provide proof of future contracts and commissions, you might find a lender willing to accept your application, but your options will be much more limited. You will also need to provide a larger deposit and have a good credit rating to reduce the risk to the lender.

If you’ve been self-employed for 12 months or less, it is worth speaking to a mortgage broker to discuss your options.

When assessing your application, lenders want to understand how much your business makes. Therefore, the amount you can borrow will be based on your net profit after all expenses and other deductions rather than your turnover.

There is no reason why you can’t get a joint mortgage with a self-employed person. Both applicants will need to prove their income; the employed borrower can do this with payslips, and the self-employed person will need to provide the documents detailed above.

It may be slightly harder to get a mortgage if one of you is self-employed and they don’t have sufficient evidence to prove their income. To help your application, it’s worth naming the employed borrower as the lead applicant if possible.

Self-certification mortgages are no longer available and were banned in 2014 following the Mortgage Market Review. 

They were designed specifically for self-employed borrowers and allowed them to confirm their own income without having to provide any evidence. They were banned as they led to people being accepted for mortgages they couldn’t afford.

If you can prove your income and pass all of the other eligibility criteria, there’s no reason why you shouldn’t get the same mortgage deals as anyone else.

The rate you get will depend on things like the size of your deposit, your affordability and your credit rating. If you need help getting accepted by most lenders, you may have to look at specialist self-employed lenders who can charge higher interest rates.

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¹Office for National Statistics, January to March