Finding a mortgage as a self-employed person can be difficult. Here are some of the key questions we get asked every day. Our helpful answers will give you some reassurance that getting a mortgage is certainly possible as a self-employed person.
Being Self-Employed doesn’t mean you can’t get a mortgage – we often just have to jump through more hoops to get you there.
Being able to get a mortgage depends on your circumstances. Your mortgage is assessed based on your income and it will depend on whether you’re a sole trader or a limited company director.
There are a few key things that you need to know before applying:
Limited Company Directors:
To get a self-employed mortgage, you will need to follow these steps to gather what you need:
Know your aspirations:
Know how much money you have:
Know your debts and liabilities:
Download the following:
This is one useful calculation that will help you work out how much you can borrow.
Sole traders: take your net profit and times that by 4.5.
Example: if you’re earning £50,000 a year, times that by 4.5, and you’ll get a rough loan estimate of £225,000.
Limited Company Directors: most mortgage lenders on the high-street will use salary and dividends. To do the calculation you can combine those and times it by 4.5.
Example: salary and dividends combine to equal £50,000 a year, times that by 4.5, and you’ll get a rough loan estimate of £225,000.
Employed: use your gross pay for the year (before tax pay, not what goes into your bank account) and again times that by 4.5.
If there are 2 applicants for the mortgage, then just combine both your yearly income and do exactly the same calculation.
Now that is by no means set in stone, that is only an example, every mortgage lender is different, but it gives you an indication as to how much you could potentially borrow.
Presently there isn’t a specific mortgage for self-employed people. However the lenders do all have different criteria, and therefore depending on your circumstances there might be one lender that is better for you than the next.
The job of an adviser is to understand your circumstances and provide you with a mortgage that is suitable, along with the lowest value mortgage comparing all interest rates available and any associated fees.
There is no ‘1 size fits all’ with mortgages, so the right one for a self-employed person will depend on a number of factors such as:
Getting a self-employed mortgage with 1 years accounts is possible! You need at least 1 years accounts for a handful of lenders to accept you – many others require 2 years+. Some high-street lenders might even require 3.
The key criteria for 1 years accounts self-employed mortgages:
There are no higher ‘self-employed mortgage rates.’ You have the potential to get the SAME rates as everyone else, you just might need to jump through more hoops to get there.
In some cases, a lower interest rate will come with higher fees. This could mean that it works out more expensive for you in the long run.
As self-employed mortgage brokers we have access to the entire market. This means that we can search out the best rates for your specific circumstances, taking into consideration all of the fees and deals available.
First time buyer self-employed mortgages are possible! Being self-employed AND a first time buyer means that getting a mortgage isn’t always easy, but don’t let that stop you.
If you have not had any form of credit, i.e. a loan, credit card, HP on a car etc. then your credit score may be lower than the average.
Having credit as above and proving you can manage it, pay it on time and even repay it in full, shows a mortgage lender that you can manage debt. This may also increase your credit score.
This could potentially have a positive impact on your ability to get a mortgage, depending on your circumstances.
If you have not had any credit then you may still be able to maintain a mortgage.
You will still need to follow all of the steps above whether this will be your first mortgage or not.
Some lenders may have specialist interest rates for self-employed people, but it does very much depend on the criteria and your circumstances.
When we talk about “deals” in the mortgage world, we are referring to Fixed, Tracker, Discount and Standard Variable Rate and other such interest rate terms.
Most mortgage lenders offer the same deals to all applicants. There are, however, some lenders who offer special deals or different deals for self-employed people.
Once I have carried out an assessment of your income, affordability and circumstances, I will provide a quote which outlines all the facts and figures. This is called a Key Facts Illustration.
When your initial deal comes to an end, you may revert to your mortgage lenders Standard Variable Rate (SVR). These are generally higher than the “deal” so to avoid paying more for your mortgage than necessary, seek advice about a re-mortgage.
The best deal for you is dependent on your specific circumstances. We can help you find:
Fixed Rate Deals: you pay a fixed amount of interest on your mortgage for a set amount of years, usually 2, 3, 5 or even 10 years.
Tracker Rate Deals: your interest rate is a specific amount that is tied to the Bank of England base rate. For example, you have a tracker rate of 1% above the Bank of England base rate. As the base rate increases or decreases, your tracker rate increases or decreases, always staying at 1% above.
Discounted Rate Deals: for a set period of time, you pay interest at a discounted rate. That means you receive a discount of the lenders Standard Variable Rate: as the SVR rises and falls, so does what you pay.
Standard Variable Rate: this is a rate that each mortgage lender decides on individually – some will be higher than others. It’s not necessarily tied to the Bank of England base rate, although this could influence what lenders decide to do. This is often the rate you revert back to once your “deal” has ended.
Using a self-employed mortgage adviser can help greatly when you’re searching for a mortgage.
In 2015 I moved home. This marked the beginning of my journey to becoming the expert in helping self-employed people find mortgages.
As a company director and my wife being a sole trader, I was rejected by my current lender when I wanted to move my family to our dream home. After many hours of strenuous research and calling back and forth, I found a lender that would consider all my income to lend me what I needed. Now, after everything that happened, I’ve focused my business on helping other self-employed people find the mortgage deals they need.
All my advisers are self-employed sole traders. We understand what being self-employed is like. We understand your exact scenario. We know how to read your accounts, how the mortgage lender will read your profit and loss, balance sheets and view the sustainability of your income.
Finding a mortgage for self-employed people like you is what we do. From across the market, we can source mortgage deals for self-employed individuals. Whether you’re a sole trader, ltd company owner, entrepreneur, or even just employed, we can help.
I am always on the look-out for more experts, so if you know an adviser that would like to join my team, please get in touch!
The best self-employed mortgage is going to be the one that takes into account your personal circumstances and all of the above.
As a regulated firm, we have to offer the best self-employed mortgage taking into consideration all of your circumstances.
It is our promise to you, once you join Active Brokers, that we will endeavour to make sure you are on the best self-employed mortgage for your circumstances at all time.
Book A No Obligation Self Employed Mortgage Consultation With One of Our Expert Brokers Today