Close this search box.
Close this search box.

6 Mortgage Tips for Sole Traders

The latest industry news and guides from Active Mortgages.

Are you a Sole Trader and planning to buy, move or remortgage soon?

You will see why these Tips could give you a higher success rate when it comes to your mortgage.

1. You’re going to need proof of income.
2. Wait until you have at least one year’s trading.
3. Having an accountant could help.
4. Wait before changing from sole trader to an Ltd Company.
5. What to do if lenders average your income over the last two years.
6. Decreasing Profits in the latest year could be an issue.

We recommend thinking 6-12 months in advance to get all your ducks in a row.

Click the video below to watch or scroll past it to read the blog:

Hello, ladies and gentlemen, Gary Das here of Active Mortgage and today I want to bring you six tips for sole traders, i.e. self-employed people. We’ve had success with over 250 business owners and entrepreneurs in the last two and a half years from all of my businesses and this is coming from the clients that we’ve had the best success with, that have experienced the least amount of stress, and of mortgage applications that have gone through the quickest, the simplest, and with the less pain for both parties.


Tip number one is you’re going to need to have your company accounts, and that’s going to need to be for 12 months of trading. Now in some instances, you might not have company accounts and the alternative to that is the HMRC document or your accountant document called a SA302 or a tax calculation and that comes along with a tax year overview. Now what we’re going to be using from that is your net profit. So after all expenses have been paid, you’re left with a net profit figure before you’re due your tax and that’s what mortgage lenders generally use to work out how much you can borrow.


Tip number two is to wait until you have one year’s trading. So if you’ve been previously employed and you’ve gone to self-employed, you need to wait until you’ve got that full 12 months of self-employment before you start thinking about getting a mortgage. Now it could be possible with less than one year, but you’re going to find a couple of lenders that will do it at the present time, so personal recommendation is to wait until you have the full 12 months.


Tip number three is to have an accountant. Now a lot of my clients do self-certify their tax returns online but when a mortgage lender wants to ask questions and when a mortgage lender wants to find out more information about your business and about your earnings, there is a professional that they can contact, so you could get a mortgage without an accountant and certainly many of my clients have, but the ones that we have the best success with and the ones that go through quicker and easier, or have done in the past, generally have an accountant.


Tip number four is changing from a sole trader to a limited company. My personal recommendation is to wait until you have a full 12 months trading as a limited company business owner. Accountants will look at your business and will potentially advise you to change from sole trader to limited company midway through the tax year, you could still get a mortgage if you choose to do that but you’re going to find that your lender availability, the number of lenders that are willing to offer you, potentially, a mortgage is going to be much smaller. So having that full 12 months as a sole trader, 12 months as a limited company is by far more beneficial.


Tip number five is looking at averaging your income over the last two years. The majority of high street lenders are going to want to average your earnings over the last two years. Now if you’re a growing business, much like I was back in 2015, you’re going to find that that average could affect the amount that you can borrow. So if your latest year’s profits and earnings are greater than the previous year, there could be an opportunity for you to utilize those, providing I can understand your business or your mortgage advisor can understand your business, because as long as it’s shown to be sustainable and that it’s going to stay or increase at that level, a mortgage lender may consider the latest year only.


Tip number six is for decreasing profits and this is equally a bit of a problem, because if your profits are decreasing or your income is decreasing then mortgage lenders are going to ask questions, because they’re concerned is it going to happen next year or the year after that, so certainly make sure that your business and your income is in a strong position when you start thinking about applying for a mortgage.

So I hope these tips have been useful to you. Please do leave me any comments if you would like me to answer them and I have an easy next step for you. You can go and buy a copy of my book the Self Employed Mortgage Guide, which is an Amazon bestseller, or you can visit our website active. mortgage where we’ve got a free download that is, the Seven Mistakes That Most Limited Company Business Owners and Entrepreneurs Make When Applying for a Mortgage, and in there as well I’ve put a list of the key documentation that you need to have and the mistakes that we often find with that documentation, so that you can get them already and you can make your life easier.

Thank you very much indeed and we look forward to seeing you at the next one.

Here is what to do next:

If you liked this blog we think you will love this one we did on 6 Mortgage Tips for Limited company Business Owners!


If you’re looking to go a step further, you can go and download your FREE copy of – 7 MISTAKES BUSINESS OWNERS AND ENTREPRENEURS MAKE THAT COULD JEOPARDISE YOUR MORTGAGE  


Give us a call on 01245 850165


Active Mortgages - The UK's Leading Mortgage & Finance Specialists

Self Employed Mortgage Guide

Buying your dream home is one of the most important steps in a your life, for a whole host of reasons.

Check out our YouTube channel for informative videos about our finance services

Active Mortgages - The UK's Leading Mortgage & Finance Specialists

Book a call with one of our team to talk about your requirements.

Active Mortgages - The UK's Leading Mortgage & Finance Specialists

Book a call with one of our team to talk about your requirements.