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How To Get a Mortgage When Self Employed in The UK

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If you’re self-employed, getting a mortgage may seem like an impossible task. However, it’s not as difficult as you think to get a self employed mortgage. You just need to know how to prepare.

Steps to get a mortgage as a self-employed person

  • You’ll need to prove your income. A lender will want to see that you have at least 12 months of regular, stable income from your business before they consider offering you a mortgage.
  • Your business has to be viable. The lender will want proof that the business is going well and offering some security for them if things go wrong for a self-employed person. They’ll also want documents showing their ability to pay back any loans (such as audited accounts).
  • You need a deposit ready. If you don’t have enough money saved in the bank or invested elsewhere, then getting a mortgage could be difficult. Your earnings will need to be high enough to cover any monthly payments while still leaving some left over at the end of each month to live on.

Step 1: Tax returns

  • Ensure you have enough tax. You need to pay enough income tax to support your mortgage. If you’re self-employed, this means ensuring that the amount of tax paid through self-assessment is sufficient. This can be done by checking HMRC’s site and making sure that everything is correct.
  • Check with HMRC if there are any issues with your claim, such as not paying enough national insurance contributions or incorrectly claiming expenses on travel or mileage when working away from home for business purposes (if applicable).

Step 2: Sort out your paperwork

  • Your self-employed income is an important factor in your ability to get a mortgage. During the application process, you’ll need to provide proof of your income and this may mean providing a statement from your accountant or bookkeeper. This can take some time for them to organise, so make sure that you start this process early on in the application process to avoid any delays.
  • You may also need other documentation such as 6 months’ bank statements as well as credit card statements if they’re used for work expenses.
  • Some lenders will accept scanned copies of documents instead of originals but this isn’t always possible so make sure you check with them first before sending anything off!

Step 3: Get your accounts in order

When applying for a mortgage as a self-employed individual, lenders will typically request evidence of your income. This may include an Accountant’s Certificate, the last two or three years’ accounts, or the last two or three HMRC forms SA302 and corresponding Tax Year Overviews. For sole traders, lenders will examine the profits of the business, and for partners, their share of the profits. Directors of limited companies will be evaluated based on a combination of salary, company profits, and dividends received.To increase your chances of success when applying for a mortgage, it is important to prepare your accounts in advance. Lenders will typically look for a profitable business with steady or growing profits, rather than fluctuating or decreasing profits. Additionally, a strong balance sheet, where assets exceed liabilities, will indicate a healthy business position.If you do not have enough years of accounts or tax returns to meet the lender’s requirements, consider presenting contracts and jobs planned for the future. Be sure to finalize and file your accounts and tax returns with HMRC before applying for finance, and make sure that your accounts and returns are as up to date as possible.

Step 4: Make sure you have enough deposit

The next step is to put together a deposit. Most lenders will require at least 10% of the property price saved in your own savings. The more money you can save up yourself and the less risk you pose to them, the better off you’ll be when applying for a mortgage.This is especially true if your self-employed income fluctuates from month to month or year to year—lenders often look at this data when determining how much they’re willing to lend. So if your finances aren’t stable yet, start saving as soon as possible so that when it comes time for your application it won’t throw up any red flags.A mortgage broker can help determine how much deposit would work best with whatever upsides are being offered by various lenders (and there are many!). A good broker will also keep track of changes in rates over time so that they know how much money should actually be saved up before closing on a house purchase

Step 5: Getting a decision in principle

The DIP is a lender’s decision about whether or not to lend you money. It’s also known as a conditional approval, because it depends on you meeting certain criteria. Generally speaking, this is usually the first step in the mortgage application process and is often used to decide how much they will lend you and at what interest rate.

What is a decision in principle?

A decision in principle is a lender’s agreement to lend you a certain amount of money based on your income and expenditure. It doesn’t mean that you will definitely get the mortgage, but it does mean that you are likely to.Many people who have self-employed income are concerned about getting approved for mortgages. If a lender decides to offer you a mortgage, they will usually make this known by sending an ‘offer letter’ or DIP (decision in principle). The DIP will confirm the amount of money they intend to lend you, which could be lower than your actual borrowing requirement if other lenders refuse your application or charge higher rates of interest because of it

Mortgage options for the self-employed

If you’re self-employed, you need to prove that you’ve been trading for at least one to two years depending on the lender and that your business has generated sufficient profit over that period. Your credit score will be taken into account when getting a mortgage with this type of employment history because it is assumed that those who work on their own are more likely to default on payments than employees or employers with regular income streams from other sources (such as commission).

You need to know how to prepare

It may not be as difficult as you think to get a self employed mortgage, but it’s important that you know how to prepare.
  • You need to know what documents you will need to provide and how they will affect your mortgage application.
  • You need to know what you need to do in order to get a decision in principle (DIP).
  • You need to understand your options for mortgage products so that you can find the best one for your situation and goals.
To get a self-employed mortgage, you need to make sure your finances are in order. This means getting all your paperwork in order, making sure that you have enough deposit and sorting out your accounts so that you can show lenders that you are creditworthy. It’s important not to rush things as this could cause mistakes and delays when applying for loans or mortgages from lenders who do not accept self-employed income. If you need help finding the right mortgage lender for your situation then please feel free to contact us today!


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

Self Employed Mortgage Guide

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