Mortgages for self employed

As a self-employed customer, you still have access to the same mortgage products as everyone else. As a specialist mortgage broker, we can make it easier for you to access these products.

Self employed documents

To be considered for a self employed mortgage, you must provide:

• One year of accounts
• Evidence of your earnings through a SA302
• A full trading history

If you don’t have everything here, there’s no need to be concerned since there are some lenders who will consider your application based on the information you can provide.

Furthermore, it helps your application if you have a good deposit because this will lower your Loan to Value (LTV). Your credit rating will also be a factor, but if you do have a bad credit history, we will still consider your application.

Depending on the type of business you have there are some things to be aware of in your application.

Sole traders

If you’re a sole trader, you’ll most likely need to supply a tax self-assessment. The HMRC can do this calculation for you, and as a result, you’ll receive an SA302. This shows the income you have received and corresponding tax that is due.

Partnerships

As a partnership, you need to be aware of the share of the business profit you receive. This is so the lender can review the business accounts and see the money you receive from the total business income.

Limited company

As an owner of a limited company, you are typically an employee of the company that receives a salary as well as a profit dividend. It’s important that you make sure the accounts that you submit reflect both salary and dividend to give the lender a true reflection of your income.

A mortgage is made up of two parts:

• Capital – the money you borrow
• Interest – the charge made by the lender on the money you owe

Repayment mortgage: you pay back the capital and the interest together in one monthly payment. Over the duration of the mortgage your balance will get smaller and your mortgage will be paid in full by the end of the term – usually 25 years. This is the most common type of mortgage.

Interest only: you start paying back the interest on your mortgage on a monthly basis. At the end of the mortgage term you need to repay the whole of the capital in one lump payment. If you choose this kind of mortgage the lender will need to know how you intend to pay off the capital at the end. It could be that you are paying in regularly to savings and investments or it could include a pension payout. These are not very common anymore but could help in certain circumstances.

Part repayment and part interest only – this option is a mix of both, so at the end of the term you’ll have paid off some, but not all of the capital and you’ll still need to find a way of repaying the remaining balance.

You can apply for a residential mortgage if you are:

• aged 18 or over

• One or more years’ 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 a company director)

Mortgage brokers have the benefit of hosting a number of mortgage lenders on their panel. Using a broker saves you time and effort in searching for a lender that will consider your application. Clever Mortgages deals with specialist lenders and will go over your situation and advise on the best way forward for getting a mortgage in place, at the best rate available to you.

Mortgage brokers can help you find the best deals on the market – not just from one lender. With a broker you’ll get:

• Valuable knowledge, through years of experience helping customers to find mortgages
• An improved chance at finding a mortgage, some mortgages are only available through a broker
• Help with the application process, as usually just one application can be used across various lenders
• Advice on how to improve your chances, for instance getting a guarantor or applying for a joint mortgage

Many self employed firms use an accountancy firm to manage their yearly accounts and quite rightly so, their expertise is invaluable to ensuring your returns are accurate and on time. Your accountant can also be very useful in your mortgage application.

Firstly, your accountant is best placed to collate all the information you need for your application. They have easy access to your accounts and tax returns. Also if they hold chartered status, many lenders will accept the accounts they provide as evidence of income.

In addition, it’s important to be aware that historically, you and your accountant may have looked to reduce your income in order to pay less tax. Naturally, this may affect your mortgage application as it shows you earning less than what may be realistic.