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

Can I get a mortgage if I’m self-employed?
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Self-employment has numerous advantages. You’re able to work for yourself and set your own schedule. But although being self-employed means you have more freedom, it can also mean that you have significantly less job security. That’s something that mortgage lenders take into account when you’re applying for a mortgage.

Let’s take a look at whether you can actually get a mortgage as a self-employed person and what you can do to improve your chances of success.

Can I get a mortgage if I am self-employed?

Yes. However, it could be more difficult than it would be if you had a regular job.

Even though you will, in principle, have access to the same range of mortgages as everybody else, you may have to jump through a few extra hoops to successfully secure a loan. 

To get a mortgage, you’ll need to demonstrate that you have a steady stream of income.

What do I need?

According to financial products comparison website, Money Supermarket, to prove your income when you apply for a  mortgage as a self-employed person, you’ll need to provide:

  • Two or more years of certified accounts
  • SA302 forms or a tax year overview (from HMRC) for the past two or three years
  • Evidence of upcoming contracts (if you’re a contractor)
  • Evidence of dividend payments or retained profits (if you’re company director)

Lenders also prefer that self-employed mortgage applicants provide accounts that have been prepared by a qualified, chartered account so that they can be sure of your reliability.

Along with proof of income, you’ll also need to provide:

  • Identification (passport and driving licence),
  • Council tax bill
  • Utility bills dated within three months
  • Six months of bank statements

Are mortgages for self-employed people more expensive?

No, not always. If your application is successful, you should be able to obtain the same mortgage deal as someone with regular employment.

The size of your deposit, as well as your credit score, are far more likely to influence your mortgage rate.

Which lenders offer self-employed mortgages?

As a self-employed person, you can apply for a mortgage with most mainstream lenders. However, if you are having difficulty getting accepted, you may need to look for a specialist lender. For example, you might approach a lender that deals exclusively with self-employed people.

Your chances of getting a mortgage with these types of lenders are likely to be higher. However, you will probably have to pay a higher rate.

Has Covid made it more challenging to get a mortgage when self-employed?

In a word, yes. While it was already difficult, the coronavirus pandemic has added a new set of challenges.

For example, lenders are now asking home buyers to submit more paperwork to support their applications. In some cases, a larger deposit is being demanded. Some lenders have also reduced the amount that buyers can borrow.

A recent report by property insurance company CIA Landlords highlights the fact that once the pandemic struck, lenders became extremely strict when self-employed people applied for a mortgage. The report explains that lenders decided to dig a bit deeper with these applicants to make sure that lending to them would not be a risk.

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How can I improve my chances of getting a mortgage?

Here are a few useful tips to increase your odds of getting a mortgage as a self-employed person.

  • Try to save as much as you can for a deposit. The more you can put up initially, the higher your chances of getting approved.
  • Ensure that your credit history is in good shape. Keep up with your repayments, regularly monitor your credit report (and report any mistakes immediately) and keep your credit utilisation low.
  • Get on the electoral register. This is vital because lenders will use it to check your identity and confirm where you live.
  • Consult a mortgage broker. A mortgage broker can point you in the right direction by advising you on which lenders are a good fit for your needs. Also, they can assist you in meeting the requirements for a successful application.
  • Have all the required documents ready.
  • Apply with a specialist lender.

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