Is it more difficult to get a mortgage if you’re self-employed?
Getting a mortgage if you’re self-employed can be more of a challenge as you’re less likely to have a stable income, making it more difficult for lenders to decide if you could afford the payments on a mortgage.
However, while it can be trickier, getting a mortgage is certainly not impossible if you’re self-employed – you’re just likely to need to provide more evidence of your income.
The above comparison only includes mortgages from lenders that may accept you if you are self-employed.
It also includes some specialist mortgage deals that are designed for self-employed borrowers.
Some deals are only available through brokers, who can look at your finances and help you find a mortgage. Contact a broker if you need help comparing lenders that will accept you.
How to get a mortgage if you are self-employed
What is classed as being self-employed?
Lenders will usually view you as self-employed if you own more than 20% to 25% of a business from which you earn your primary income. You might be a sole trader, company director or contractor.
What is a self-certification mortgage?
Self-certification mortgages, or “self-cert” mortgages, were designed to help those unable to provide proof of their regular income and were popular with the self-employed.
However, self-cert mortgages were banned by the Financial Conduct Authority (FCA) in 2014 over concerns that borrowers were being approved for mortgages they couldn’t afford. As a result, self-employed people must now apply for a mortgage in the same way as anyone else.
Improve your chances of being accepted for a self-employed mortgage
You can take several steps to increase your chances of getting accepted for a self-employed mortgage. These include:
Saving a large deposit: The larger your deposit, the smaller the risk for your lender. You could also use your equity if you already own a home and want to move house or remortgage.
Improving your credit record: A poor credit record makes it harder to be accepted. You can improve your credit score by checking you’re on the electoral roll, paying bills on time and correcting any mistakes on your credit report.
Sorting out your paperwork: Make your personal finances and your business's financial situation as clear to your lender as possible. Get your accounts organised and up to date to prove your business is profitable enough for you to keep up with your mortgage. Ideally, your accounts should be prepared by a qualified accountant, and you’ll need at least two years’ worth.
Here is how to prove you can afford a mortgage if you are self-employed.
Do you have to pay higher mortgage rates if you’re self-employed?
Not necessarily. Mortgages that accept self-employed people are also open to everyone else, with the same interest rates. If you can provide full details about your income, have the relevant paperwork to hand, and have a good credit score, you should have access to the same mortgage rates as a regular full-time employee who earns a similar income.
How to find the best self-employed mortgage
To find the best self-employed mortgage, you will need to use the above comparison table to shop around and compare your options. You can get most types of mortgages if you are self-employed, including:
Make sure you compare both the interest rate and the fees charged. When applying, you will need:
Two or more years of certified accounts
SA302 forms or a tax year review from HMRC from the past 2 to 3 years
Evidence of upcoming contracts where applicable
Proof of dividend payments or retained profits if you’re a company director
How to pick the best type of mortgage for your circumstances
