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How Does A Self Employment Mortgage Differ From A Standard Mortgage?

The latest industry news and guides from Active Mortgages.

For self-employed professionals, obtaining a mortgage can be more complex than for the average wage earner, but not impossible. With increased scrutiny over income and expenses typical of self-employment, taking on a new home loan as an entrepreneur or small business owner can be a challenge. However, with the right guidance on your application, a self-employed mortgage is simple to obtain. Several benefits are associated with this type of mortgage that differ from that of a traditional mortgage allowing you to secure the financial aid you need for your dream home in a few simple steps.

Overview of Self-Employment Mortgages

In recent years, there has been a surge in self-employment across a range of industries with a total of 4.3 million self-employed workers in the UK alone as of Jan 2023. Consequently, this has led to a rise in demand for mortgages tailored to meet the needs of self-employed individuals. A self-employment mortgage differs from a conventional mortgage in that it considers your income differently. Typically, a lender will want to see two to three years of tax returns to accurately and fairly assess your income, instead of just looking at your payslips. While a self-employment mortgage may require more documentation than a traditional mortgage this will provide evidence to your lenders that you are responsible with your finances and make you a more trustworthy applicant.

Applying for a Self-Employment Mortgage

When it comes to applying for a mortgage, there are several elements you need to consider such as paperwork and the amount that you can borrow. The good news about this style of mortgage is that there are self-employment mortgages available that are specifically designed for people in your situation. Rather than relying purely on your annual income, these types of mortgages will take into account your earnings over a longer period, which can be especially helpful if your income is sporadic or if you’re in the early stages of self-employment.

Should you find you are in this early stage, it is important to do your research and speak to a mortgage adviser to understand what type of mortgage will be best for you and your circumstances. With different borrowing amounts and interest rates for every different lender finding the right one for your current financial situation is the first step to a successful application.

Common Requirements for Receiving a Self-Employment Mortgage

Self-employment can be a liberating choice for those looking to take control of their career, but it has the potential to make applying for financial aid more challenging without the proper guidance. When it comes to applying for financial aid such as mortgages, lenders will often look at income as well as any existing lines of credit you already have to fairly judge your application. However, due to the nature of being self-employed, the mortgage application is assessed differently. To qualify for a self-employment mortgage, lenders will typically require at the very least two years of successful self-employment income.

Though some will offer you a self-employed mortgage based on one year’s worth of accounts, you’ll need to be able to provide detailed financial records, such as tax returns and business statements, as evidence of your income. To fairly judge your application, lenders will also look at your credit score, debt-to-income ratio, and other financial obligations to determine your eligibility. While the requirements may seem daunting, working with a knowledgeable mortgage broker can help you navigate the process and find the right lender for your unique situation.

Tips for Making the Application Process Easier

When it comes to putting in your application, there are tips, you can implement that will make it more manageable. Firstly, make sure you read the instructions carefully and follow them to the letter. Don’t skip any steps or provide incomplete information as this could negatively impact your application. Secondly, be organised and keep all the necessary documents in one place for them to be easy to find.

Thirdly, don’t be afraid to ask for help. If you’re not sure about something, seek clarification from the relevant authority. Lastly, proofread your application before you submit it. Spelling and grammatical errors can make a bad impression and reduce your chances of success. With these tips, you can make the application process easier and increase your chances of success.

What to Do If Your Application is Denied

We understand that receiving a denial on an application can be frustrating and disheartening, but it is important to remember that it is not the end of the road. First and foremost, review the reasons for the denial and take note of any specific areas that need improvement. Use this as an opportunity to learn and grow your credit score, and resubmit your ap[plication.

Understanding the differences between self-employed and typical mortgage applications is essential if you are pursuing a new loan. Self-employed applicants may face additional qualification requirements, but with the right paperwork and other documents, their application can still be successful.

Being aware of common requirements, connecting with specialists that understand the process, opting for fixed terms, and seeking advice can all help ensure your application is properly submitted. With this comprehensive insight in hand, those looking for a self-employment mortgage will benefit from a much smoother application experience.

Whether you’re ready to start filling out applications or just exploring your options, taking these tips into account will make navigating the waters of self-employment mortgages that much easier. Don’t forget – if your application is denied, don’t give up! There may still be other mortgage opportunities available to you.

Looking for additional guidance in your application? Get in touch with us today and let us show you all the possibilities!


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

Self Employed Mortgage Guide

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

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