If you are self-employed or a business owner, applying for a mortgage can seem daunting. However, there is help available! As specialist brokers we specialise in securing mortgages for self-employed. We take the time to understand your personal circumstances to find the right solution for you.
Mortgages for Self-employed
Each lender will have different criteria around how they assess self-employed income. This is why it is so important we fully understand how your income is structured.
The main difference when applying for a mortgage when self-employed is the lenders will be assessing your income based on your annual tax returns or accounts and not monthly or weekly payslips.
A common misconception for the self-employed is that you must have 3 years accounts before you can apply for a mortgage. Whilst there are lenders that will require 3 years accounts there are also many lenders that will be happy with just 2 years and some will even accept just 1 year.
When assessing the income of a sole trader a lender is going to be looking at the figures declared on your tax returns at the tax year end (April 5th). Each lender will assess the figures in a different way. Below are a few examples of how a lender may assess the income and what figures they will use:
- An average of the last 3 years. (or latest figure if lower)
- An average of the last 2 years. (or latest figure if lower)
- Most recent years figures.
Limited Company Director
If you are the director of a limited company, it is likely that a lender will class you as self-employed depending on the percentage of ownership you have. The minimum ownership for you to be treated as self-employed for most lenders will be 20 -25%. This means that if you own equal to, or more than this you will be treated as self-employed.
The way a lender will assess this is the same as the examples given in the sole trader section of the guide.
As with any self-employed person, a director will need to declare their personal income at the end of the tax year (April 5th). This will normally be a mixture of income from a director’s salary and/or company dividends.
There are also lenders that will look at your companies profit rather than the personal dividends you have drawn. This is great if your company has been making good profits but you have not been taking a lot of money out for yourself.
Here at Complete Mortgage Advice we are specialists in this area, we will be able to assess exactly what borrowing you are able to achieve, and which lender is going to be offering the most suitable solution.
If you think we can help you then get in touch, we would love to help you on your journey.