Self-employed mortgages

If you’re self-employed or run your own business, it shouldn’t stop you from getting a mortgage – but there are some things you’ll need to know before you apply. Read our guide to find out how you can get the right mortgage for you.

If you’re self-employed or run your own business, it shouldn’t stop you from getting a mortgage – but there are some things you’ll need to know before you apply. Read our guide to find out how you can get the right mortgage for you.

Daniel Evans
Mortgages expert
minute read
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Last Updated 15 NOVEMBER 2021

Can I get a mortgage if I’m self-employed?

You can get a mortgage if you’re self-employed, but you’ll have to go through the same affordability and credit assessment checks as any other borrower. You may also find that some lenders are wary unless you can provide them with a solid record of your accounts.

Different lenders have different lending criteria, so don’t give up if you’re refused once. Some lenders calculate the amount you can borrow based on several years’ income; others base it on your previous year of trading. So you'll have a better chance of being accepted for a mortgage if you can wait until you’ve been in business for a couple of years, before you apply. Either way, you’ll need to show how much income you’ve reported to HMRC and how much tax you’ve paid.

Is it harder to get a mortgage if you’re self-employed?

If you’re self-employed it can be harder to get a mortgage, as lenders see you as a bigger risk. It’s certainly not out of the question though.

Having at least three years’ worth of accounts will give you access to the biggest choice of lenders. If your income varies, most lenders will take an average of your past two or three years’ income. If you’ve just had a particularly good financial year, it might be worth finding a lender that only looks at your previous year’s accounts.

What counts as self-employed?

HMRC will consider you a sole trader if you’re working for yourself, taking on different clients and being responsible for your own business. Lenders will see you as self-employed if you own more than a 20% share of the business that pays you your income. It’s possible to be both self-employed and employed, if you have a job but run a side hustle outside of office hours. 

Lenders apply different rules depending on if you’re self-employed, a partner or the owner of a limited company. It’s important that you know which applies to you, so you can have the right paperwork to hand. 

Do self-employed people have to pay higher rates? 

If you only have a year’s worth of accounts, fewer lenders will be willing to offer you a mortgage. That means you might have to go to a specialist lender, who may charge you a higher interest rate. The more in-depth financial history you have, the more lenders you can approach – which is your ticket to a potentially lower interest rate.

Do self-certification mortgages still exist?

The Financial Conduct Authority (FCA) banned self-certification mortgages in 2011. This means people can no longer apply for mortgages without proving their income.

What will I need to apply for a mortgage if I’m self-employed?

If you’re self-employed, you’ll need to provide evidence to prove that you can repay the mortgage. This might include:

  • A large deposit - if you have a large deposit, you’re more likely to be eligible for a mortgage with competitive interest rates. You should aim for at least a 10% deposit.
  • A good credit history -  this shows lenders that you can manage debt effectively, by not going over your credit limit and keeping up with your repayments. The better your credit history, the more likely you’ll be approved.
  • Proof of income - you’ll typically need to show documents that demonstrate a steady income over the past year (or preferably two or three). This can be a tax return, a profit and loss statement or anything else that shows you have regular money coming in. The majority of lenders now accept HMRC’s SA302 form as verification of income.
  • Savings -  these can support your case by showing that you can manage your money effectively, even if your income fluctuates. 

Expert view from David Hollingworth at London & Country Mortgages 

“The self -employed have had a tough time during the pandemic. Lenders will certainly still offer mortgages, but they may ask more questions and require more proof of income to make sure that the impact of Covid hasn’t affected your ability to afford the mortgage. That could mean providing the standard couple of years’ track record but also proof of current income, like business bank statements.”

How can I boost my chances of being accepted?

Don’t worry, there are lots of ways you can increase your chances of being accepted for a mortgage if you’re self-employed. Make sure you follow these steps:

  • Check your credit record – you’ll need a good credit score. Companies such as Experian and Equifax will let you check your score for free. If you have a bad credit rating you can take steps to improve your score.
  • Approach the right lenders – some mortgage lenders are more sympathetic to self-employed applicants than others.
  • Make sure you’re on the electoral roll – if you’re not, it will lower your credit score.
  • Get an SA302 form – this provides lenders with evidence of your earnings. HMRC will give you it once you’ve filed your self-assessment tax return.
  • Manage your credit cards – that means paying off more than the minimum amount each month and staying away from your limit. If you’re in danger of maxing out your credit card, it’s better for your credit score if you spread the debt over two cards.
  • Save for a bigger deposit – the bigger your deposit, the more mortgage deals you’ll be eligible for. If you know you’ve a large sum of money coming in, you may be better off waiting for it to arrive, so you can put down a larger deposit.

Get fee-free mortgage advice from our broker partners London & Country Mortgages Ltd (L&C)**. Go to L&C mortgages.

**London & Country Mortgages Ltd (L&C) are a multi-award winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002).
L&C are not part of Compare the Market Limited. Compare the Market may receive an introducer's fee from L&C, for customers who use this service. All applications are subject to lending and eligibility criteria.L&C will not charge you a broker fee should you decide to proceed with a mortgage.

How will I be assessed as a self-employed mortgage applicant?

Lenders may have different expectations, depending on which category you fall into:

Sole trader: if you’re a freelancer or contractor, you’re most likely classed as a sole trader. If this is the case, you’ll need to complete a tax self-assessment and ideally have it signed off by an accountant. You can then provide lenders with an SA302 form to prove your income.

Partner: if you’re in business with other people, mortgage lenders will want to see evidence of your share of the profits.

Limited company: if you have a registered limited company, you’ll pay yourself a salary and dividends. If you’re applying for a mortgage, lenders will want to know how much this amounts to.

Once you know how much you’re earning, you can work out how much you can borrow.

How to find the best mortgage deals if you’re self-employed

Comparing mortgages is easy and straightforward with us. We do all the hard work for you. Find the right deal for you by starting a mortgage comparison today.

How much do self-employed mortgages cost?

To get a mortgage, you may have to pay an arrangement fee. This could be a set amount or a percentage of the total loan value. Some lenders offer fee-free mortgage deals but you may find there are other legal or admin costs, so you’ll need to do your research. 

See more on mortgage costs and fees

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What do I need to get a quote?

To get a mortgage quote, you’ll need details of your income and how much your property is worth. If you already have a mortgage, you’ll need to know the remaining balance and how long you’ve left to pay on it.

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