Self-Employed and Considering a Mortgage? Here’s What You Need to Know

Many people believe that being self-employed means you cannot apply for a mortgage. While self-employed applicants may be asked to provide additional evidence of income and affordability, being self-employed does not automatically prevent you from obtaining a mortgage. 

Mortgage lenders assess each application individually based on their own lending criteria, affordability requirements and your personal circumstances. 

Here we explain how you can apply for a mortgage if you’re self-employed. 

What is Considered Self-Employed? 

To be considered self-employed, you will generally fall into one of the following categories: 

• Sole Trader 

You own and operate the business yourself and are personally responsible for any profits or losses. Your income is generated directly from your work. 

• Partnership 

You own a share of a business with one or more people and share the profits, which form part or all of your income. 

• Limited Company 

You have set up a company that is legally separate from you as an individual. Your income may include a salary, dividends, or a combination of both. 

• Contractor or Freelancer 

Contractors and freelancers may operate as sole traders, partnerships or limited companies. Different mortgage lenders may assess this type of income in different ways. 

When applying for a mortgage, lenders will assess your application based on your business structure and individual circumstances. The evidence required can vary depending on how your income is received and the lender’s criteria.

What Evidence Will You Need to Provide? 

When applying for a mortgage as a self-employed applicant, the exact documentation required will depend on your circumstances and the lender’s criteria. However, understanding the types of information commonly requested can help you prepare in advance. 

Documentation that is commonly requested may include: 

Standard Documents 

• Proof of identity 
• Proof of address 
• Bank statements 
• Proof of deposit

Proof of Self-Employed Income 

• Company Accounts 

Having up-to-date company accounts prepared by a qualified accountant may help you provide the information a lender requires when assessing your application. 

• SA302s and Tax Year Overviews 

An SA302 is a document produced by HMRC that summarises the income reported on your Self Assessment tax return for a particular tax year. 

A Tax Year Overview is a separate HMRC document that confirms the tax due based on your Self Assessment return and shows any payments made. 

Lenders may request these documents to help verify your income and assess affordability. 

Steps to Take Before Applying for a Mortgage if You’re Self-Employed 

As a self-employed homebuyer, there are steps you can take to help strengthen your mortgage application and improve your preparedness before applying. However, mortgage approval is never guaranteed and will depend on your individual circumstances and lender criteria. 

• Save a Good Deposit 

A larger deposit can reduce the amount you need to borrow and lower your loan-to-value (LTV) ratio. This may improve the range of mortgage products available to you, although eligibility and interest rates will depend on your circumstances and lender criteria. 

• Check Your Credit Report Regularly 

Reviewing your credit report regularly can help you identify any inaccuracies and better understand how lenders may view your application. 

• Register on the Electoral Roll 

Being registered on the Electoral Roll can help lenders verify your identity and address as part of their application process.

Speaking to a Qualified Mortgage Adviser 

It may be beneficial to speak with a qualified mortgage adviser before you apply for a mortgage. 

A mortgage adviser can explain the mortgage application process, help you understand the options available based on your circumstances, and explain any fees or charges that may apply. They can also help you understand the documentation that may be required by different lenders. 

Important Information 

Your home may be repossessed if you do not keep up repayments on your mortgage. 

The Financial Conduct Authority does not regulate some commercial and buy-to-let mortgages. 

A lifetime mortgage or equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.