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Self-employed mortgages

If you’re self-employed or run your own business, it shouldn’t stop you from getting a mortgage. Here’s what you need to know before you apply.

If you’re self-employed or run your own business, it shouldn’t stop you from getting a mortgage. Here’s what you need to know before you apply.

Written by
Sajni Shah
Consumer expert on money and utilities
Last Updated
20 DECEMBER 2022
6 min read
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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.

Mortgage providers 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. Either way, you’ll need to show how much income you’ve reported to HMRC (HM Revenue & Customs) and how much tax you’ve paid.

Your home may be repossessed if you don’t keep up with repayments on your mortgage.

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 your income. It’s possible to be both self-employed and employed: for example, 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.

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 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.

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 that confirms you can repay the mortgage. This might include:

  • 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 for a mortgage.
  • 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 in the past few years. 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 the cost of living crisis 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. You can check your score for free with a credit reference agency (CRA). 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 typically 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.

Top tip

If you’re planning on changing the structure of your business – for example, from being a sole trader to a limited company – it might be best to hold off until you’ve secured mortgage approval. Lenders look for stability, and a major business change just before you apply might put them off.

How much do self-employed mortgages cost?

When working out the cost of your mortgage, it’s important to consider all the costs involved, not just the basic cost of repayments and interest rate. When comparing mortgages, pay special attention to the APRC (annual percentage rate of change) – this gives you a better idea of the overall cost of your mortgage including fees and charges.

See more on mortgage costs and fees

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Frequently asked questions

Do self-employed people have to pay higher rates?

If you’ve been self-employed for a few years, have solid proof of income, a decent deposit and a good credit rating, then you’ll be in a good position to find a low interest rate mortgage.

However, if you only have a year’s worth of accounts and your credit rating’s not great, 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.

How long do I need to have been self-employed for?

It depends on the provider, but for most mainstream lenders you’ll need to have been self-employed for at least two to three years and have accounts to prove it.

What documents will I need to apply for a mortgage?

As well as proof of your name and address, when you apply for a mortgage you’ll also need:

  • Tax form SA302
  • Statements of two to three years of accounts from an accountant
  • Bank statements – usually for the past three to six months
  • Evidence of the deposit you’re putting towards a property.

Some lenders may ask for more paperwork as proof that you can keep up with the repayments.

Do self-certification mortgages still exist?

No, the Financial Conduct Authority (FCA) banned self-certification UK mortgages in 2009. This means people can no longer apply for mortgages without proving their income.

Car Finance 247 Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged over 18 or over. Credit is subject to status and eligibility.

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Sajni Shah - Consumer expert on utilities and money

Sajni is passionate about building products, allowing Compare the Market to help you make great financial decisions. She keeps track of the latest trends and evolving markets to find new ways to help you save money.

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