Self-Employed Mortgage Guide – Getting a mortgage when you are self-employed can feel more complex than applying as an employee. This guide explains how self-employed mortgages work and how to improve your chances of approval.
More than four million people in the UK are self-employed. Many worry that self-employment makes buying a property more difficult. In reality, it is possible to secure a mortgage with the right preparation and advice.
If you run your own business, work as a freelancer, or operate as a contractor, lenders assess your income differently. Instead of payslips, they review your accounts, tax returns, and financial consistency. This helps lenders understand how stable and sustainable your income is over time.
This insider’s guide will walk you through everything you need to know: from how lenders assess self-employed applicants, to the documents you’ll need, to the common pitfalls to avoid. You’ll also discover practical tips to strengthen your application and improve your chances of being approved the first time.
Whether you’ve just started thinking about buying your first home, are looking to remortgage, or want to invest in property through your business, this guide is designed to cut through the jargon and give you clear, practical advice.
Who Counts as Self-Employed?
In mortgage terms, you are usually classed as self-employed if you own 25 per cent or more of a business, or you do not receive a regular PAYE salary.
This applies even if you pay yourself partly through PAYE but also take income in other forms.
Lenders focus on how your income is structured and how reliable it is.
- Types of Self-Employed Applicants: Lenders recognise several types of self-employed working arrangements. Each is assessed slightly differently.
- Sole Trader: You run your business as an individual and keep profits after tax. Income is usually based on net profit shown on your tax returns.
- Limited Company Director: You operate through a limited company and pay yourself using salary and dividends. Some lenders may also consider retained profits within the business.
- Contractor: You work on a contract basis, often through a limited company or umbrella company. Income is typically assessed using your contract day rate.
- Freelancer: You work with multiple clients and may operate as a sole trader or limited company. Assessment depends on your business structure.
- Partnership: You share ownership of a business with one or more partners.
Lenders assess your share of profits rather than total business income.
What Lenders Look At When Assessing Self-Employed Applicants
Lenders want to be confident that your income is sustainable and affordable.
Key areas they assess include:
Length of Self-Employment
Two to three years of trading history is ideal.
Some lenders will consider one year in certain cases.
Income Consistency
Stable or increasing income improves lender confidence.
Credit History
A clean credit profile helps.
If there are issues, seek advice early.
Deposit Size
Larger deposits often unlock better rates and more lender choice.
Business Type and Sector
Some industries are viewed as more stable than others.
Common Myths About Self Employed Mortgages
There are several misconceptions about obtaining a mortgage as a self-employed individual.
Myth: You cannot get a mortgage if you are self-employed
This is false.
Many lenders offer mortgages designed for self-employed applicants.
Myth: You must have three years of accounts
Not always.
Some lenders accept one or two years with strong supporting evidence.
Myth: Lenders avoid self-employed borrowers
Lenders focus on income stability, not employment status.
Several lenders specialise in self-employed lending.
Myth: Retained profits cannot be used
Some lenders do consider retained profits, especially for limited company directors.
An experienced adviser from our network of expert mortgage brokers in the UK can confirm which lenders are best suited to your situation.
How Self-Employed Income Is Calculated
Income assessment depends on how you trade.
- Sole Traders: Based on net profit shown on SA302s or HMRC tax calculations.
- Limited Company Directors: Based on salary plus dividends. Some lenders may include retained profits.
- Contractors: Based on a daily or hourly rate multiplied by a working year, often 46 to 48 weeks.
- Freelancers With Multiple Clients: Assessed similarly to sole traders or contractors, depending on setup.
Documents Needed for a Self-Employed Mortgage
Lenders require evidence to verify income and affordability. Commonly requested documents include:
- SA302s or Tax Calculations: Usually covering the last one to three years.
- Tax Year Overviews: Used to confirm SA302 figures with HMRC.
- Limited Company Accounts: Signed by a qualified accountant, usually covering one to three years.
- Accountant Reference: Some lenders request confirmation of income and trading status.
- Business Bank Statements: Typically, three to six months.
- Personal Bank Statements: Usually, three months to assess spending habits.
- Proof of Identity and Address: Such as a passport, driving licence, or utility bill.
- Deposit Evidence: Savings statements, gifted deposit letters, or sale proceeds.
Top Tips to Improve Your Mortgage Chances
- Use a Specialist Mortgage Broker: Many lenders only work via brokers.
- File Your Taxes Promptly: Outdated tax info can slow down or block applications.
- Build a Strong Credit Profile: Register on the electoral roll, pay bills on time.
- Save a Larger Deposit: 10–15%+ is ideal for better rates.
- Get an Accountant: A qualified accountant can help present your finances clearly.
- Avoid Big Business Changes: Avoid changing structure (e.g., sole trader → Ltd Co) just before applying.
Case Study: “How I Got a Mortgage With One Year’s Accounts”
Name: Lisa
Job: Freelance graphic designer
Years trading: 1
Challenge: Many lenders said no due to limited history
Solution: Used a broker who found a lender accepting 1 year’s SA302 and 12 months of consistent income. Lisa also had a 20% deposit and good credit.
Outcome: Approved for a 2-year fixed mortgage at a competitive rate.
“I was overwhelmed trying to apply on my own. My broker knew which lender to approach and what documents they’d want. If you’re newly self-employed, don’t give up!”
Get Advice Before You Apply
Self-employed mortgages can be more complex, but they are very achievable.
The key is choosing the right lender and presenting your income correctly.
Using the find a mortgage adviser service helps you connect with advisers who understand self-employed lending and current lender criteria.
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FAQ: Self-Employed Mortgage Guide
| Question | Answer |
|---|---|
| 1. Can I get a mortgage if I am self-employed? | Yes, self-employed individuals can get a mortgage. Lenders will review your income stability, trading history, and affordability rather than relying on traditional payslips. Consistent earnings over at least two years help demonstrate reliability. |
| 2. How do lenders assess my income? | Most lenders calculate income using your SA302 forms or tax year overviews from HMRC. They often average your last two years’ net profits or salary plus dividends if you operate as a limited company. |
| 3. What documents do I need for a self-employed mortgage? | You will usually need two years of tax calculations (SA302s), tax year overviews, recent business bank statements, accounts prepared by a qualified accountant, and proof of ID and address. |
| 4. Can I get a mortgage with only one year of accounts? | Some specialist lenders may consider applicants with one year of trading history, especially if you have a strong deposit, good credit record, and evidence of future contracts or ongoing work. |
| 5. Do I need a larger deposit if I am self-employed? | A typical minimum deposit is 10 percent, but having 15–25 percent can increase your chances of approval and access to lower interest rates. The stronger your financial profile, the better your mortgage options. |
| 6. Does my credit score affect my application? | Yes, your credit score plays a vital role. A strong credit history shows lenders that you manage money responsibly. Check and improve your score before applying to maximise approval chances. |
| 7. How much can I borrow as a self-employed applicant? | Lenders usually offer around four to five times your verified annual income. The final amount depends on your affordability assessment, debt commitments, and overall financial stability. |
| 8. Can I apply jointly if my partner is employed? | Yes. Applying with a partner who has a regular salary can strengthen your application. Lenders combine both incomes to calculate borrowing capacity and overall affordability. |
| 9. What if my income fluctuates each year? | Lenders prefer consistent earnings, but they will average your income over the last two years. If your latest year is lower, some lenders may use that figure instead of the higher average. |
| 10. Should I use a mortgage broker for self-employed applications? | Using a mortgage broker can be beneficial. Brokers who specialise in self-employed mortgages know which lenders are flexible and can help you find competitive rates that match your trading history. |
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