Self-employed mortgage guide - how to get a mortgage when you work for yourself

A self-employed mortgage is no different to any other home loan, but you may need to jump through a few more hoops to get one. You will have to prove your income (which can be more complex when you work for yourself) and have sufficient information (in some cases up to two years worth) to share with your mortgage lender.

If you can’t supply the required information, you may not be able to borrow as much, or may not be approved for the mortgage at all. There are specialist lenders available, but you may find that you are charged a higher premium as you are deemed a higher risk to lend to.

Can I get a mortgage if I’m self-employed?

Yes, most lenders offer self-employed mortgages at the same rates and under the same terms as to employed borrowers.

If they usually lend up to a maximum of 4.5 times your income, for example, that doesn’t change just because you work for yourself.

Use our mortgage calculator to see how much you could borrow.

Is it harder to get a self-employed mortgage?

It can be, because every borrower needs to prove their income to the lender to get the best mortgage rates. That can be more difficult if you’re self-employed, as your finances are often more complex.

There are many reasons the self-employed struggle to prove their income. Maybe you’ve had a bad year of trading, invested in your business (which has reduced your profits), or your company is new.

Mainstream lenders (such as high street banks) like to see a track record of self-employed earnings over two or three years. If your profits are variable or your income on paper doesn’t reflect what you can really afford, it can be hard to get the numbers to stack up.

If that’s the case, a lender may not offer you the size of mortgage you need.

Nick Morrey, technical director at broker Coreco, said: 'In reality, it is more difficult for self-employed applicants due to the nature of how they are paid and taxed, and the documentation required to evidence their earnings. This complexity, compared to employed people, who can evidence their earnings by supplying payslips and bank statements, makes the process significantly harder.'

Will I pay more for my mortgage if I’m self-employed?

Not necessarily. Providing you can afford the mortgage and prove your income in the way the lender requires, you have exactly the same access to mortgages as an employed borrower.

Many self-employed borrowers won’t encounter any problems.

But many others can’t prove their income to the strict requirements of a mainstream lender and can end up struggling to access a mortgage.

Luckily, there is another way. Specialist mortgage lenders are experts in dealing with self-employed borrowers.

They look at each case on its individual merits and have more flexible criteria around how they assess what you can afford, and how you can prove it.

Because these specialists are willing to lend to borrowers that can’t get a mainstream mortgage, they often charge a premium, so you could end up paying more.

What information will I need to provide for a self-employed mortgage?

A mortgage lender will want to see the same information as they do with any borrower – proof of ID, proof of address, and proof of your income and outgoings.

The major difference is that proof of income can be more complicated if you’re self-employed.

Instead of payslips, you usually have to provide at least your last two SA302 forms from HM Revenue and Customs, which show your tax calculation for the year. Lenders might also ask for your full audited accounts.

Morrey adds: 'Lenders may also request three months’ business bank statements to see how the business is faring at the moment. For contractors they may ask for a minimum of 12 months’ worth of contracts in lieu of accounts.'

'Lenders can request anything they deem necessary as part of their decision to lend, so be prepared to supply these documents to make the process as smooth as possible.”

Explore how to improve your credit score for a mortgage.

Do I need to have been self-employed for a certain amount of time to qualify for a mortgage?

Usually lenders will want to see at least two years’ accounts before lending to self-employed borrowers.

Although there are exceptions, says Jane King, adviser at Ash-Ridge Private Finance: 'For some occupations (usually professions such as doctors and lawyers) a lender may accept one year,' she explains. 'However the vast majority require at least two.'

Some specialist lenders also accept just one year’s accounts, regardless of profession, although they may charge a premium.

Will most lenders offer mortgages to self-employed people?

Yes, if you work for yourself, you can usually access the full product range of most lenders.

For example, Aldermore is a specialist mortgage lender that supports the self-employed with flexible lending criteria and smaller building societies are often willing to look at each case individually to see if they can find a way to lend. There are also many lenders you may not have heard of that a mortgage broker has exclusive access to.

A broker can also help you navigate the market. They’re experts in helping self-employed borrowers find a mortgage and have access to specialist lenders that don’t deal directly with borrowers, helping widen your search.