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How to get a UK mortgage if you are self-employed?

There is no doubt in the fact that it is difficult to get a mortgage for self-employed workers and contractors. However, there is a misconception that it is impossible. If you are self-employed, there are ways in which you can get a mortgage after following certain processes. In the past few years, it has become difficult for first-time buyers to get their hands on the mortgage. Moreover, the self-employed category has suffered most of all.

There is no such category as a self-employed mortgage. It is just the same as a normal mortgage, but with the passage of time, these mortgages are termed as self-employed mortgages. If you are self-employed, then you will have to tackle a number of obstacles in proving the income you get relative to someone who is one a company payroll.

What is needed to get a mortgage?

The first and foremost step to get a mortgage for a self-employed person is the need to show the income to the lender. Lenders tend to check the credit history. The better the accounts are, the higher the chances are of getting a mortgage. As a general rule of thumb, you will need:

  • Accounts of an approximate of two years,
  • Track record of the work done regularly,
  • A good credit history,
  • Decent amount of deposit.

The average profit being made by the self-employed individual is something that lender will take into account when deciding to approve the application. There are many lenders that recommend hiring an accountant to go through all the relevant documentation. Make sure the accounts are updated so that lender has access to the latest information. This may leave an impression on the lender.

If you do not have access to accounts for two years, even then some lenders may take into account your application. Moreover, the chances of getting the application approved are high if there is a decent deposit. A good credit record is also determinative of getting a mortgage. It plays a very important role in the strength of the application. You can look out for different ways in which credit rating can be improved. Lenders credit checks the business to ensure that all the reports are in the right shape. Make sure no mistakes are made when all the financial documentation is formulated. You must also make sure to use a self-employed mortgage calculator to work out how much you can borrow.

Proving income

This is one of the aspects that most borrowers are worried about. As mentioned above, most lenders in the UK need to have a look at two years of account to get an idea of income. Get an accountant to put these all up together. Ensure that all the figures are understood by you, and you can take the lender through them.

There are several problems that borrowers come across when proving income. Most borrowers tend to reduce the income legally that is taxable. This is done in order to reduce tax. This can be a problem when applying for a mortgage because you need to demonstrate the most considerable income possible. This is where advice from taxation consultants, accountants and mortgage brokers can come into play.

Generally, the longer you are self-employed, better the chances are to get a mortgage. When assessing an application, there are some lenders that also consider retained profits. This can be a problem for company directors compared to employees. Nevertheless, it is better to take an idea from the broker as well as the accountant in order to get more detailed advice.

source: maecapital

Finding a mortgage

Finding a mortgage has always been a challenging task for self-employed borrowers. It can be time-consuming and may require effort as well. There are many ways in which you can find a mortgage. Their online lenders as well that can give you an idea about different mortgage deals.

Nevertheless, mortgage brokers are always recommendable if you are self-employed. They are well aware of the lenders that are willing to lend to individuals who are self-employed. They even know of lenders who are ready to take into considerations the accounts less than two years. This is where the experience of broker comes into play that can help you get hands on the lowest rates available in the market.

However, hiring a mortgage broker can add up to additional costs. Even though the additional investment can be beneficial in the long run, many borrowers are not compelled by the benefits offered by them. This is where you can go through online mortgage tables and comparisons in order to get a more detailed idea. If you want to make a well-informed decision, then ensure you have access to as much knowledge as possible.

Dos and don’ts

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There are many things that borrowers of self-employed mortgages must do and many things that they must abstain from. Here is a list of some of them:

  • It is imperative for all the borrowers to keep the records up to date. It is essentially important to make sure all the accounts are set up in a proper manner.
  • In order to prepare the accounts and tax returns, it is vital to hire a professional certified accountant. Taxation and accounts are technical areas, and nothing can be done on your own. This is why you must consult professional help to get the work done in a more precise manner.
  • The mortgage broker must be consulted in order to get exposure to better options.
  • The current lender must be consulted as well if you want to remortgage.
  • One of the major things that you must avoid is minimizing the income too much for the purposes of tax. This will have a detrimental impact in the long run. It will negatively impact the chances of getting a mortgage.
  • The worst thing any borrower can do is assume that mortgage is impossible to get when you are self-employed. It is difficult but clearly not impossible to do so.

The bottom line

Self-employed people have a number of difficulties when getting a mortgage. However, it must be remembered that there are many self-employed individuals who have access to a mortgage. Just follow the guide above to maximize the chances of getting a mortgage easily and successfully.

Ricardo is a freelance writer specialized in politics. He is with from the beginning and helps it grow. Email: richardorland4[at]