Without the reassurance of a guaranteed salary, self employed borrowers often find it harder to obtain a mortgage than those in standard employment..
An introduction to self employed mortgages
In theory, providing that you are able to prove that you can make the required repayments on the loan, as a self employed buyer you will have access to the exact same range of mortgages as those with regular incomes.
Whilst there are considerably fewer specialist lenders with products designed specifically for self employed buyers, it is not uncommon for mainstream lenders to routinely offer the self employed mortgage deals.
When a lender is assessing your income they are also likely to review your application differently depending on which of the three business structures you have set up.
Sole Trader - If you are a sole trader, it is likely your lender will look at your profits when assessing your application. In order to do this, they usually will ask that you provide them with SA302 form, which shows the total tax income received and your total tax that is due.
Partnership - Within a partnership structure, a mortgage lender is likely to look at each partner’s share of the profit. Consequently, you should have accounts that show exactly how much you have made so your lender can easily view your annual income.
Limited Company - As a director of a limited company, it is likely that you will pay yourself a basic salary plus dividend payment. If this is the case, you should ensure that the lender takes both these elements of your income into consideration when assessing your mortgage affordability.
It is also important to take into consideration that the amount that you will be able to borrow will be primarily based on the amount of money that you earn and many self employed people look to minimise their earnings in their account in order to reduce the amount they are required to pay in tax.
Consequently by doing this, they are likely to reduce the amount available to borrow when buying a new house. So if you need a larger loan, you should look to increase the amount that you declare in tax.
How we can help you find the best self employed mortgage
We work with many of the UK's leading mortgage providers which means we have access to self employed lenders with flexible criteria and competitive rates for self employed buyers. Our mortgage specialists can help evaluate your personal situation and help you in finding a mortgage that fits your criteria.