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How to get a mortgage as a self employed person

07th September 2020

It can be more difficult to secure a mortgage when you’re self-employed. This is because your earnings are likely to fluctuate month-on-month, meaning that you pose a higher level of risk to a mortgage provider than an employee with a stable salary. Whilst there are more challenges to getting a mortgage when you’re your own boss, it’s by no means impossible. Here’s how to get a mortgage when you’re self-employed. 

 

Can I get a mortgage as a self employed person? 

Yes, you can absolutely get a mortgage as a self-employed person – you just have to jump through more hoops to prove that you earn enough to meet your monthly repayments. 

Following the introduction of the Mortgage Market Review in 2014, lenders have been far more stringent on who they give credit to.  If you’re self-employed, this means providing a lot more documentation to prove that your finances are in good shape. 

 

What documents are needed to apply for a mortgage as a self employed person? 

To be confident that you can afford the mortgage you’re applying for, lenders generally request the following documentation: 

  • SA302 forms covering the past three years 
  • Evidence of future contracts 
  • Evidence of dividend payments or retained earnings (for directors) 
  • Certified accounts for at least the past two years 

Tip –  Lenders take more reliance from accounts prepared by qualified, chartered accountants. 

 

Required documents 

In addition to the above, lenders will also request the following in order to verify your identity and suitability for a mortgage: 

  • Passport 
  • Driving licence 
  • Council tax bill 
  • Six months (minimum) of bank statements 
  • Utility bills, dated within the previous 3 months (as proof of address) 

 

Can I get a mortgage with 1 year or less of self-employment? 

It’s very unlikely that your mortgage application will be accepted if you have been self-employed for one year or less. This is for the simple fact that your financial records and accounts for a period of this length doesn’t constitute sufficient evidence for lenders; they need to be confident of your ability to meet monthly repayments, and accounts going back less than a year aren’t solid indicators of your future financial stability. 

Prior to the 2008 financial crisis, self-employed workers could apply for a ‘self certification mortgage’. This type of mortgage allowed applicants to self-certify their incomes without formal documentation, which led to many taking out loans that they couldn’t afford. Since the Financial Conduct Authority banned self-certification mortgages, lenders have been much more stringent in their criteria of who can apply for a mortgage. 

 

Self employed mortgage rates 

Although it can be harder to secure a mortgage as a self-employed person, rates aren’t necessarily higher. As long as you have all the required documentation and enough evidence of your income, you’ll be eligible for the same rates as an employed person. Remember, the more money you put down as a deposit and the higher your credit rating, the more likely you are to be offered good mortgage rates. 

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Despite the challenges of getting a mortgage as a self-employed worker, it’s more than possible. If you’re self-employed and looking to secure a mortgage, it’s a good idea to work with a mortgage advisor. They’ll help you to understand how much you can borrow, and will know which lenders are most likely to offer you an agreement. Working with a mortgage lender also brings the extra benefit of gaining access to deals that aren’t commercially viable. 

 

 

If you’re self employed and looking to buy a property, get in touch with IMC Financial Services. Our expert mortgage brokers will work with you to understand your needs and find a deal that suits your financial situation.

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