Getting a mortgage when you’re 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:
- Two years worth 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.
Using a mortgage broker
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.
Does my business type affect my 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.
Using an accountant
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.
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Why Clever Mortgages?
At Clever Mortgages we can offer you the support and advice required to ensure you get the right mortgage for your first home. We provide access to a comprehensive range of mortgages from across the market. We are also authorised and regulated by the Financial Conduct Authority (FCA) and adhere to the Treating Customers Fairly (TCF) guidelines, so you can be confident that we will treat you with integrity and only recommend products that meet your needs.
Mortgage types
A fixed rate mortgage is where your interest rate stays the same for a set time period (usually between 2-10 years). As a result your repayments are exactly the same each month, regardless of what happens to other mortgage rates. These types of mortgages are popular with first time buyers and people looking to budget each month, especially those who have suffered from a poor credit history.
The main downside to a fixed rate mortgage is that if mortgage rates go down you can be paying a higher amount than you would on a variable rate mortgage. However, this can also go in your favour and if interest rates increase you can be paying less than you would on a variable rate.
Every lender will have their own standard variable rate (SVR), which is considered their basic mortgage. This interest rate goes up and down, usually in line with the Bank of England’s interest rates but the lender is free to raise this at any time.
This means that your monthly payments can go up or down depending on what the interest rate is at a given time. Some months you could be paying more whilst other months you could be paying much less.
A discount mortgage is when a reduction is applied to the lenders Standard Variable Rate (SVR) for a certain length of time (typically 2-3 years). Discount mortgages are attractive as they can allow you to pay slightly less than the bank's standard rate. However as the SVR can still fluctuate they are not ideal for people who are looking to stick to a strict long term budget.
A tracker mortgage is basically a type of variable rate mortgage. What makes them different from other variable rate mortgages is that they follow – track – movements of another rate, the most common rate that is tracked is the Bank of England Base Rate.
A capped mortgage is the same as a variable rate mortgage; however the interest rate can never rise above a set “cap”. These mortgages can work well for people who can budget for different mortgage repayments each month but want the reassurance that their payments will never go above a certain amount.
Offset mortgages are linked to a savings account as well as your current account. Your savings will be 'offset' against the value of your mortgage, and you'll only pay interest on your mortgage balance minus your savings balance. These types of mortgages work well for higher earners or people who have a good amount in savings that they want to use towards paying their mortgage.
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