Self-Employed Mortgage Success
The latest industry news and guides from Active Mortgages.
The latest industry news and guides from Active Mortgages.
A couple approached Active Mortgages seeking advice on purchasing a home together.
One applicant was employed full-time with an annual salary of approximately £42,000, while the other ran a growing business through a limited company. The self-employed applicant had previously operated as a sole trader before incorporating the business a few years earlier.
The couple planned to sell an existing property and combine their resources to purchase a new home. They had already built up a substantial deposit through savings, equity and investment accounts, and hoped to retain some funds for future home improvements once the purchase was complete.
Before proceeding, they wanted to understand how lenders would assess their circumstances and what level of borrowing might be available.
The primary challenge centred around the self-employed applicant’s income.
Although the business had experienced strong growth, the first year’s figures following incorporation were relatively modest due to investment in new premises and business expansion. The most recent year’s accounts showed significantly improved profitability, but the clients were unsure whether lenders would focus on turnover, salary, dividends or overall company performance.
There were also several additional considerations:
Like many buyers, they wanted reassurance that their plans were realistic before beginning a serious property search.
During the consultation, we reviewed the couple’s full financial position and explained how mortgage lenders typically assess limited company directors.
We outlined the different approaches lenders may take, including:
This was particularly important because some lenders can take a more flexible view of self-employed income where a business has demonstrated consistent growth.
We also reviewed:
After assessing the information provided, it became clear that the clients were in a stronger position than they initially believed.
Their historic credit issues appeared unlikely to create significant difficulties, and their deposit placed them in a favourable loan-to-value position. We were also able to identify lenders whose affordability models could potentially make better use of the self-employed income available.
The couple left the consultation with a clearer understanding of their options and greater confidence in their purchasing plans.
They discovered that:
Most importantly, they gained a better understanding of the mortgage process and the steps required to move forward when they were ready.
This case demonstrates a common misconception among self-employed applicants: that business turnover alone determines mortgage affordability.
In reality, lenders assess income in different ways, and selecting the right lender can have a significant impact on borrowing potential.
It also highlights the value of obtaining professional mortgage advice before making property decisions. By understanding affordability, lender criteria and deposit requirements from the outset, buyers can approach the market with greater certainty and confidence.
At Active Mortgages, we regularly assist employed applicants, self-employed professionals, limited company directors and high net worth individuals in securing mortgage solutions tailored to their individual circumstances and long-term objectives.
Book a call with one of our team to talk about your requirements.
