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Self-Employed Mortgages Podcast Episode
Stuart from Blue Pepper Mortgages joins the Mortgage and Protection podcast to discuss Self-Employed Mortgages, listen below.
Is it harder to get a mortgage if you are Self-Employed?No, it’s not harder, it’s just different. An employed person needs certain documents to prove their income to a lender, and a Self-Employed person requires different documents.
How many years do you have to be Self-Employed to get a mortgage? What if I only have one year’s accounts?If you came to me with just one year’s accounts, I could get you a mortgage, but I would make you aware that there would be considerably fewer lenders we can go to. If you’ve got two years’ accounts that opens more opportunities, and if you had three years’, the entire market is open to you.
Are self-certified mortgages still available?This is still a common question even though this type of mortgage was banned almost a decade ago. Self cert mortgages aren’t available any more – everyone needs to prove their income as part of a mortgage application.
What documents do I need when applying for a Self-Employed mortgage?It depends on whether you’re a sole trader or a limited company. Starting with limited companies, if you own less than 20% a lender would view you as employed and you would just need to supply payslips. If you own more than 20% of the business, you need to provide certified accounts, plus payslips if you take a wage from the company, tax calculations which used to be called SA302s and tax year overviews. You usually need details from the last three years, but two years is also acceptable. For a sole trader, we would generally need tax calculations and tax year overviews for up to the last three years, if you have them.
What is the difference between someone who is Self-Employed and a limited company director?
Things can be a little more complicated for a company director compared with a sole trader. With a sole trader the lender will usually take your income from your tax information.
For a company director some lenders will look at your share of net profits; some will use the dividends, some will use your salary. For some mortgage clients, net profits are a lot bigger than the dividends and the salary they take, and the company retains the profit. Some leaders allow you to use that retained profit to boost your lending capacity.
A good broker will look at your specific situation and select the most appropriate lender to meet your needs.
Can I get a joint mortgage if one person is Self-Employed? How do I apply?
Yes, this is very common. The employed person normally needs to produce three months payslips and their latest P60. Then the Self-Employed person would need to provide the documents we mentioned earlier: tax calculations, tax year overviews and, for a limited company, certified accounts.
Is Buy to Let available for the Self-Employed?
Yes – there aren’t usually any issues in getting a Self-Employed Buy to Let mortgage. Some Buy to Let lenders require a minimum earned income. You need to earn an income from your day to day business rather than from rental property. Some might set the minimum income at £20,000 to £25,000. But a few lenders don’t set a minimum income at all.
Most Buy-to-Let Mortgages are not regulated by the Financial Conduct Authority.
How much can a Self-Employed person borrow?
There’s no difference in how mortgage lenders calculate affordability for the employed and Self-Employed. The pandemic has meant some lenders have made it more restrictive for Self-Employed people, as it is difficult for lenders to distinguish between the businesses that did well during lockdown and those that didn’t. As a result they have been asking for more documentation.
One client recently had to provide 12 months’ business and personal bank statements to show that the business was surviving.
How do you prove your income when you’re Self-Employed?
For a limited company, proof of income is in your accounts, which state the net profit of the company, any dividends and salary. The lender will also seek evidence from tax year overviews.
If you’re a sole trader, the tax calculations and tax year overviews will demonstrate your income. Some lenders ask for business bank statements as well.
How does remortgaging work for the Self-Employed?
It’s very straightforward to remortgage. If you’re Self-Employed, you need the same documentation as if you were buying a property. As long as you have the documents ready, it’s no problem at all.
How can a mortgage broker help with a Self-Employed mortgage?
Lots of our clients are Self-Employed: both sole traders and limited company owners, and each one has a slightly different situation. Blue Pepper mortgages will go through all the details with you step by step.
Some people find the mortgage journey a bit daunting, but this is something we do day in, day out, so we can hold your hand through the whole journey. We’ll be there by your side until you receive the keys to your new home, and we’re there for your whole mortgage life. Just get in touch with us and we can start you on your journey.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE