6 Tips For Sole Traders To Help Get A Self-Employed Mortgage!

I find the key to getting a mortgage is preparation. If you prepare for all eventualities, you should be covered.

This article explores 6 tips aimed at helping sole traders get a self-employed mortgage:

1. How can I prove my income as a self-employed person?

You are going to require your Tax Calculation (a self-employed person’s P60) from your most recent self-assessment tax return.

You can get your Tax Calculation either from your accountant (if they filed for you) or by logging into HMRC and printing it out, or if you filed by paper, you will have to write to HMRC and request one.

This comes along with a Tax year overview and it is preferred you have the last 2 years available.

2. How can I get a mortgage when I’ve only been self-employed for one year?

If you’ve only been self-employed for one year, it limits the number of lenders who are prepared to lend you money, which in turn could impact the interest rates and the products that you will have access to, but it won’t prevent you from finding a mortgage altogether.

If you’ve been trading for less than 12 months, hold out until you have, before applying for a mortgage, because I am yet to find a mortgage lender who will consider this.

3. Will using an accountant help me get a mortgage?

It won’t hinder you getting a mortgage. If you have an accountant, anticipate that your mortgage lender might ask them to vouch for you, in which case they will have to prepare paperwork for you anyway. Some lenders like to see projection forecasts for the year ahead, so having a qualified accountant explain your figures, can certainly help your case.

4. Will it help me get a mortgage if I change from being a sole trader to a limited company?

It won’t make it easy if you decide to change halfway through the year as you’ll only have 6 months of limited company accounts to support you (lenders do like you to have 12 months as a minimum, either as a sole trader or a limited company, not 12 months of a mix of both).

If you do decide to switch halfway through the year, it could be possible to still get a mortgage but it could limit the number of lenders who you could borrow from.

5. How can I increase my mortgage amount?

The majority of high street lenders will base what you can borrow on your profits as an average over the 2 years (some might base it over the last 3 years, all lenders have different requirements), so the best thing you can do is ensure your profits remain consistent or increase year on year.

If your latest year has increased and there is a good reason for this i.e. increase in turnover, decrease in expenses then this explanation is very useful to a mortgage lender.

Having a more profitable latest year and using a lender that considers that over an average of 2 years should have a positive impact on the amount of money you can borrow.

Of course, the inverse also applies.

6. Decreasing profits

If your latest year’s income is less than previous years, lenders won’t average them out. Instead, they will seek to find out why there was a decrease and could reduce the amount you can borrow.

If you have experience points 5 or 6, this is where we can help you: we are great at building a story about your journey as a sole trader and can outline your experience so a mortgage underwriter understands your business’ ups and downs.

If you have any questions about any of the above or want to know more then please get in touch which can be done through //activebrokers.co.uk/ Or through social media on Facebook, Instagram, Twitter or Youtube.

 

  • This does not constitute advice, it is for information purposes only.
  • You should contact a mortgage broker for personalized advice for your specific circumstances.  Please ask us for a personalized illustration.
  • A fee of up to 2% of the mortgage amount is payable. The precise amount will depend on your circumstances. A typical example would be £995.00 payable on application and the remainder payable on mortgage offer. We will also be paid commission from the lender.
  • Limited is authorized and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (//www.fca.org.uk/register) under reference 488342.
  • Your home may be repossessed if you do not keep up repayments on your mortgage.

 

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