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Self Employed Mortgage?
We get asked lots of questions around self-employment and how it affects a mortgage application, here are examples of the questions along with explanations:
Is it harder to get a mortgage if I’m self-employed? Although the paperwork required is different from employed applicants it isn’t harder if you are self-employed.
What income do lenders look at with Self employed? Lenders are looking at your net profit before tax. (turnover minus costs and expenses = net profit) The Net profit is what you will pay tax on, this is the amount we will use to assess your mortgage affordability.
What evidence will a lender require for my mortgage application?
For Self-employed applicants the lender looks at the profit so they would normally require your latest 2 years tax calculation and tax overviews and/or 2 years accounts, some lenders may also require business bank statements.
Am I self-employed if I’m employed by my limited company?
If you own more than 20% shares in the company, the lender will normally treat you as self-employed, even if you are paid solely salary and don’t take any dividends.
I’m a director of a limited company, I only take 12k salary, what can I borrow? We often see directors of limited companies that only draw a small salary and leave the profit in the business. In these cases, we would look to apply to a lender that will use profits from the company plus your salary rather than salary and dividends. This could make a huge difference in your borrowing power.
I was a sole trader but went limited a few weeks ago, can I still get a mortgage?
The majority of lenders would require one year’s accounts from change in the legal status of the business, however, if there have been no other changes for example no new directors added, no change of company name then some lender will accept this without needing a year’s accounts of the limited company.
My profits increase in my latest year will this improve what I can borrow? Most lenders will use an average of your latest 2 year income, for example if you had a profit of 15k in year one and 25k profit in year two, most lenders would us an income of 20k for affordability, however, there are lenders that will use just the latest years.
There are exceptions to this rule, if your latest year is less than the previous, they will use the lower figure, for example. If in year one your profit was 25k and your latest year was 15k they would use 15k as your income for affordability.
Do I need an accountant to get a mortgage if I’m self-employed?
No, if you’re a sole trader and you do your own self-assessment and don’t have an accountant that won’t cause a problem, you would just need to get your latest two years tax calculation and tax overviews from HMRC.
I haven’t completed my last tax return as it isn’t due until January.
Regardless of when your tax return is due to HRMC, lenders require your latest tax calculation should be no more than 18 months old. For example, we will be able to use your 2024 tax calculation until October 2025. After this time, you will need to submit your 2025 tax returns even though HMRC have a deadline of 31st January 2026.
Every mortgage application is unique, to get a personal recommendation on your mortgage requirements speak with a mortgage adviser today.
At Mortgage Advice Hut, we offer face to face appointments at our Preston office, of telephone and video appointments from the comfort of your own home.
Book your free appointment today 01772846147
A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.