self employed mortgage

Navigating Self Employed Mortgage Options Easily

Owning your own home is an ambition for many self-employed individuals in the UK. However, obtaining a mortgage can be challenging. According to research, three-quarters of freelancers express concern about the difficulty of borrowing to buy a property. In this complete self-employed mortgage guide, we will explore the steps and options available to navigate the path to home ownership. We will discuss the preparation needed, proof of income requirements, types of mortgages available, borrowing limits, and the potential tax benefits of claiming your mortgage as an expense.

When Are You Considered Self-Employed?

When applying for a mortgage, it’s essential to understand the criteria that determine whether you are considered self-employed by lenders. To qualify as self-employed, you must own more than 20% of a business that generates your primary source of income. This classification extends to a wide range of professionals, including contractors, freelancers, sole traders, directors of limited companies, and partners in partnerships.

Unlike salaried employees, self-employed individuals often encounter unique criteria and requirements during the mortgage application process. To navigate this process successfully, it’s crucial to comprehend how lenders assess self-employment income and the documentation they typically require.

Evaluating Self-Employment Income

When determining eligibility for a mortgage, lenders assess self-employment income differently than the income of salaried employees. They consider the stability, consistency, and viability of your business as indicators of your ability to meet mortgage repayments. Your income may be evaluated based on self-employed trading profits, dividend income, retained profits for company directors, and any other relevant income sources associated with your business.

Documentary Requirements

Alongside normal documentation required during the mortgage application process, self-employed borrowers must usually provide additional paperwork to verify their income. This typically includes two or more years of certified accounts, SA302 forms or tax year overviews from HMRC, evidence of contracts, and dividend payments or retained profits for company directors. It’s crucial to keep personal identification documents, address history, bank statements, and proof of deposit up to date to streamline the application process.

Understanding the nuances of self-employment classification and the specific documentation required will better prepare you for the mortgage application process as a self-employed borrower.

Summary Table of Self-Employed Mortgage Criteria

Criteria Explanation
Ownership Percentage Must own over 20% of a business generating primary income
Profession Includes contractors, freelancers, sole traders, directors of limited companies, and partners in partnerships
Evaluation of Income Assessed based on stability, consistency, and viability of the business
Documentary Requirements Includes certified accounts, HMRC documentation, evidence of contracts, dividend payments, personal identification, address history, bank statements, and proof of deposit

By understanding the specific requirements and criteria, self-employed individuals can better position themselves for mortgage approval and secure their dream of homeownership.

How to Prepare for a Mortgage as a Self-Employed Borrower?

Preparation is key when applying for a self-employed mortgage. By taking the time to organize your finances and gather the necessary documents, you can significantly increase your chances of securing a mortgage that suits your needs. Here are some essential steps to help you prepare:

  1. Assess your financial situation: Before applying for a mortgage, it’s crucial to have a clear understanding of your current financial position. Calculate your income, consider your expenses, and evaluate your ability to comfortably make mortgage repayments.
  2. Improve your credit score: A good credit score is often essential for obtaining favorable mortgage terms. Take steps to improve your credit score by paying bills on time, reducing outstanding debts, and checking your credit report for any errors.
  3. Reduce debts: Mortgage lenders assess your debt-to-income ratio when considering your application. Paying off outstanding debts can help lower this ratio and improve your chances of mortgage approval.
  4. Organize your finances: Gather all relevant financial documents, including bank statements, tax returns, and proof of self-employment income. Having these documents organized and readily available will streamline the application process.
  5. Be on the electoral roll: Being registered on the electoral roll demonstrates stability and can positively impact your creditworthiness. Ensure you are registered at your current address before applying for a mortgage.
  6. Check your credit report: Obtain a copy of your credit report and review it for any discrepancies or issues that need addressing. Rectifying any errors can help improve your credit score and enhance your chances of mortgage approval.
  7. Avoid hard credit checks: Before applying for a mortgage, it’s wise to avoid any unnecessary hard credit checks. Multiple credit checks can negatively impact your credit score and raise concerns for potential lenders.

By following these steps and properly preparing for your mortgage application, you can increase your chances of securing a self-employed mortgage that meets your needs. Remember, each lender may have their specific requirements, so it’s essential to conduct thorough research and seek professional advice when necessary.

self-employed mortgage checklist

Proof of Income and Paperwork Needed for Self-Employed Mortgages

When applying for a mortgage as a self-employed borrower, it is essential to provide specific documentation and proof of income to support your application. The lender needs to assess your financial stability and ability to repay the loan. This section will outline the necessary paperwork that you should prepare to increase your chances of securing a self-employed mortgage.

  • Two or more years of certified accounts: Lenders typically require at least two years of certified accounts to verify your income. These accounts should be prepared by a certified accountant and should provide a clear overview of your financial performance.
  • SA302 forms or tax year overviews from HMRC: Self-employed individuals are often required to submit SA302 forms or tax year overviews from HMRC. These documents validate your income and confirm that your tax affairs are up to date.
  • Evidence of contracts and dividend payments or retained profits: If you are a company director or shareholder, you may need to provide evidence of contracts, dividend payments, or retained profits. These documents demonstrate the stability of your income and the financial health of your business.
  • Personal identification documents: Ensure that you have up-to-date personal identification documents, such as your passport or driving license, as these will be required during the mortgage application process.
  • Address history: Provide a clear record of your address history, including any previous addresses over the past few years. This helps lenders verify your identity and assess your stability.
  • Bank statements: Prepare recent bank statements that show your income and expenses. This helps lenders assess your financial behavior and ability to manage your finances.
  • Proof of deposit: You will need to provide proof of the deposit you intend to put towards the purchase of the property. This could include bank statements or documentation showing the source of your funds.

By organizing and presenting these documents, you can streamline the mortgage application process and provide lenders with the necessary information to assess your eligibility for a self-employed mortgage.

Next, we will explore the different types of mortgages available for self-employed borrowers in Section 5.

Types of Mortgages Available for Self-Employed Borrowers

Self-employed borrowers have a range of mortgage options to choose from that are similar to those available to salaried individuals. Understanding these options can help you make an informed decision that aligns with your unique financial needs. Let’s explore the different types of mortgages available for self-employed borrowers:

1. Repayment Mortgages

A repayment mortgage is the most common type of mortgage. With this option, you make monthly payments that include both the interest and capital. Over time, you gradually pay off the mortgage until the full amount is repaid. This type of mortgage allows you to build equity in your home and eventually become a homeowner without any outstanding debt.

2. Interest-Only Mortgages

Interest-only mortgages require you to make monthly payments that only cover the interest charged on the loan. The capital sum remains unchanged throughout the mortgage term. It is crucial to have a suitable repayment vehicle in place to repay the capital at the end of the mortgage term, such as an investment plan or other savings.

3. Fixed-Rate Mortgages

A fixed-rate mortgage offers stability by locking in your interest rate for a specific period, typically two to five years. This means that your monthly payments remain the same, regardless of any fluctuations in the base interest rates. It provides certainty and allows you to budget effectively, knowing your mortgage repayments won’t change during the fixed-rate period.

4. Buy-to-Let Mortgages

If you’re considering purchasing a property for rental purposes, a buy-to-let mortgage is specifically designed for this purpose. These mortgages differ from residential mortgages as lenders assess the application based on the rental income potential rather than personal income. It is essential to thoroughly research the market and potential rental income before venturing into the buy-to-let market.

self-employed mortgage options

In summary, self-employed borrowers have several mortgage options to choose from, including repayment mortgages, interest-only mortgages, fixed-rate mortgages, and buy-to-let mortgages. Each type of mortgage has its own features and benefits, so it’s essential to evaluate your financial situation and long-term goals when making a decision. Consulting with a qualified self-employed mortgage advisor can provide expert guidance tailored to your specific needs.

Mortgage Type Features Benefits
Repayment Mortgage Monthly payments include interest and capital. Gradually builds equity in your home.
Interest-Only Mortgage Monthly payments cover only the interest charged. Suitable for those with a repayment plan in place.
Fixed-Rate Mortgage Interest rate remains unchanged for a set period. Provides payment stability and budgeting certainty.
Buy-to-Let Mortgage Assessed based on rental income potential. Designed for purchasing properties for rental purposes.

Overcoming Challenges and Additional Considerations for Self-Employed Mortgages

Securing a mortgage as a self-employed borrower can present unique challenges. However, with the right strategies and considerations, you can navigate the process smoothly and increase your chances of success.

1. Show Stability in Income

One of the primary concerns for lenders when assessing self-employed mortgage applications is the stability of income. To overcome this challenge, it’s essential to demonstrate consistent earnings over time. Keep meticulous records of your income, including bank statements, contracts, and tax returns. This documentation provides evidence of your ability to cover mortgage repayments and showcases your financial stability.

2. Choose the Right Lender

Not all lenders are experienced in dealing with self-employed mortgage applicants, so it’s crucial to choose a lender specializing in working with self-employed borrowers. They understand the intricacies of the process and can offer tailored solutions based on your unique circumstances. Research different lenders, review customer feedback, and consult with a mortgage broker to find the best fit for your needs.

3. Adjust Income If Possible

If your self-employed income fluctuates, you may consider adjusting it to improve your mortgage eligibility. Speak with your accountant or financial advisor about options such as lowering deductible expenses or adjusting dividends. This can help create a more consistent income stream on paper, making you a more attractive candidate to lenders.

4. Stay Aware of Deposit Bands

Deposits play a crucial role in securing a mortgage. As a self-employed borrower, it’s essential to research and stay aware of deposit bands. Lenders often offer better interest rates and terms for borrowers who can provide a higher deposit. Aim to save a substantial deposit to demonstrate financial responsibility and improve your chances of securing a mortgage with favorable conditions.

5. Work with a Self-Employed Mortgage Specialist

Throughout the mortgage process, working with a self-employed mortgage specialist can offer invaluable guidance and support. They have a deep understanding of the specific challenges faced by self-employed borrowers and can provide tailored advice based on your individual circumstances. A specialist can help navigate complex paperwork, negotiate with lenders, and ensure you have the best chance of securing a mortgage.

self-employed mortgage

In addition to implementing these strategies, it’s vital to seek expert advice and stay well-informed throughout the mortgage application process. By addressing the unique challenges faced by self-employed borrowers, you can overcome obstacles and achieve your dream of homeownership.


Obtaining a mortgage as a self-employed individual requires thoughtful preparation and thorough documentation. However, with the right lender and guidance from a self-employed mortgage specialist, achieving homeownership is within reach. This comprehensive guide has outlined the steps, requirements, and considerations for self-employed borrowers in their quest for a mortgage. By following the advice and utilizing the provided checklist, self-employed individuals can enhance their chances of securing a mortgage and turning their homeownership dreams into reality.


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