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Self-Employed Mortgage

It might surprise you to learn that there really is no such thing as a ‘self-employed Mortgage’. The term is mentioned so often – but it’s true. There really is no such thing! There isn’t a specific mortgage product for self-employed clients. In fact the type of mortgage you can apply for is the same if you’re employed or self-employed. The difference comes from the criteria that you will need to prove your income to the lender. An employed person’s income is consistent, reliable and pretty certain that it will stay that way throughout the fixed term of their mortgage. Self-employed income cannot be viewed in the same ‘low risk’ manner. The lender will be looking for proof that your self-employed income is reliable.

In the past, there were specialist mortgages for self-employed clients called self certification mortgages. However, due to the concern customers were given mortgages they couldn’t afford the government banned these in 2014. A mortgage broker from Clements Financial can help you with all documents that you will need and provide a bespoke approach to find the right lender and product which will allow self-employed people to achieve their property goals!

Am I Self-employed?

A person is described as self-employed if they work for themselves in some capacity, rather than for an employer. There are many different ways that you can be self employed , and generally speaking you will fall into three categories:

  • Limited Company – a private company whose business is separate from its owners. 
  • Business Partner – someone who collaborates with shared control of a business. 
  • Sole Trader – a person who is an exclusive owner of their own business

If your employment is described above, then you are self-employed! A side note, you will be viewed as self employed from a lender if you own more than 20 – 25% of your business.

How is my self-employed income assessed?

As described above, depending on your type of self-employment, will dictate the way in which your income will be assessed.

For a Limited company, you would need to be registered as a limited company As well as being registered on the company house website. Your income would be broken down into either salary and dividends. The income assessed would be a mix of these. There are also lenders out there that can use your net profit towards your affordability. This process can be fairly complicated, if you send Clements Financial your accounts we will give a free affordability assessment.

(https://www.gov.uk/government/organisations/companies-house)

If you have one or more business partners, lenders would need to see information based on your share of the profits. The structure of business is unique and can therefore be complicated and confusing. If you send Clements Financial your accounts we will give an affordability assessment (free of charge.) 

A Sole trader is one of the most common types of self employment and you may well fill out your own tax assessment. The lender will assess your income using a SA302 document along with a tax year overview, most lenders would take an average of the last 2 years income. 

Self-employed mortgages. Self-employed person planning their mortgage with Clements Financial.

Do lenders support self-employed people when getting a mortgage?

With mortgages for self employed clients, there are many ways lenders have adapted to help customers obtain a mortgage. This includes using just one year’s accounts (if you are only recently self-employed, using latest years figures instead of an average of the last two years.) With any self employment mortgage there are usually obstacles that will occur. It can be complicated to prove your income, but at Clements Financial if you send Clements Financial your accounts we will give an affordability assessment (free of charge.)