Mortgages for the Self-employed

Below are 3 scenarios why our are clients are sometimes turned away from high street lenders because they are self-employed

They cannot provide three years' accounts
They do not have an accountant
They have had a previous application turned down because you are self-employed

Our expert self-employed mortgage advisors will assess your circumstances and research our mortgage panel to find you the right deal. By assessing your current needs and situation we would be able to advise you to apply in one of the two ways below.

By Status

In order to prove your income, it may be necessary to get your accountant to provide up to three years' worth of audited accounts. These should show that you could afford to repay the mortgage based on your net profit.

If you have been trading for less than three years you could run into problems, or if your accounts have shown a downturn in any of the past three years some lenders may not offer you a mortgage. In addition, some lenders will take an average of the past three years' income rather than just looking at what you have earned in the current year.

Whichever method of proving your income you choose, note that a credit check will be carried out.

By Self-Certification

Self-certification is a simple way of detailing your income as you simply self declare what you earn and the lender will not insist on seeing audited accounts.
We use numerous lenders who are willing to do a true self cert and therefore accounts are not required, again it depends on your level of credit scoring and how much you wish to borrow.

Most lenders will supplement your application with credit searches. If you are a homeowner, you will be asked to supply your existing mortgage statements, and if you are renting the lender will ask for a reference from your landlord.

Self-certification has limits - most lenders will only allow you to prove your income in this way if you want to borrow less than 75% loan to value, so you will need to put down a substantial deposit. However, some lenders may allow you borrow up to 90% on a self-certification basis.

So why does a lender allow self certification to take place – surely this is risky for them?

Lenders have woken up to the fact that an employed person can lose their job or be made redundant, an option that does not exist for the self employed.

Lenders are interested in seeing how employable you are. To give an extreme example; a plumber is probably in a better position than a successful film director because s/he can show regular, weekly work. However, the film director's few months of work here and there may look patchier.

If you haven't been in business for long enough the lender should accept a letter of confirmation from an accountant. However, if you can't show the three years accounts, you may have to pay a larger deposit.

How much can I borrow?

This depends on how much you earn and how much the property you want to buy is worth.

Most lenders will loan up to 75% of the property's value and many will go to 90 or 95%. However some will let you borrow up to 100% (max 90% for self cert)- but you'll pay over the odds for this and will probably be forced to buy mortgage indemnity insurance.

If you have a regular income and clean credit history, you're likely to get a loan fairly easily. There is also a lot of competition between lenders to get your business and this can be fierce. The amount you can borrow will vary between lenders but usually it is approx three to three and a half times your salary.

Some lenders now use more sophisticated credit rating methods, where they examine your affordability and so look at your income and your outgoings. The idea is that every borrower has different circumstances e.g. someone with two small children and high outgoings can't afford to borrow as much as a single person earning the same salary.

If you're a first time buyer it will always help if you can show you've been paying regular rent for a similar amount to what your intended mortgage payments will be.