Self Employed mortgages – myth busting!

Mortgages for the Self Employed

The Office for National Statistics, estimated that there were more than five million self employed people in the UK at the end of 2019, making up just over 15 per cent of the working population.

Around 3 per cent of self employed people have started working for themselves since April 2019, with more thought to have done so as a result of changes in working patterns brought about during the coronavirus pandemic.

In order to respond to this, we've introduced self employed mortgage products to help workers who have started their own business to buy a home.

Depending on the individual circumstances, being self employed should not be a barrier to getting a mortgage. However, myths and misunderstandings are still common, so here we attempt to provide some clarity for those embarking on the journey towards getting a mortgage when you’re self employed and becoming a home owner.

Contact us today to discuss your options.

 

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

Yes, The Cambridge offers a range of mortgages for self employed workers, whether you’re a tradesperson, entrepreneur, partner, director, artist, musician or belong to another profession.

If you have two or more years of accounts, you can apply for any mortgage in our range (subject to affordability and our usual lending criteria). However, the great news is that if you just have one year of accounts* you could be eligible for one of our Self Employed mortgages - have a chat with a member from our expert team to find out if we could have the right mortgage for you.

*further verification of income also required - please see our Self Employed mortgages for full details.

 

I’ve been self employed for less than two years, can I still get a mortgage?

Even if you only have *one year of accounts as a self employed person you could still be eligible for certain Self Employed mortgage products – although further verification of income may be required. 

*One year’s financial accounts can not be more than 9 months old

 

Do self employed mortgage applicants get the same rates?

This depends on your situation:

If you have two or more years' worth of accounts then yes, as a self employed person you can receive the same mortgage interest rates as someone who is working as an employee. However, to do this you must be able to prove your earnings, and this can be a more complex process for a self employed worker than for a salaried employee.

If you have only one year of accounts*, there are specific Self Employed mortgages available but these are offered at different rates to the wider mortgage range. 

*further verification of income also required 

 

How do I prove my income?

Lender requirements may vary, but, as an example, at The Cambridge we require the last 2 years’ tax calculations (document SA302) and tax year overviews to enable you to apply for any mortgage in our range.

For Limited Companies and Partnerships we also require 2 years’ full financial accounts if the LTV (Loan To Value) exceeds 60% or if borrowing is to be based on a share of net profits. All documents supplied will need to be dated within the last 15 months.

 

What about tax and HMRC?

Most lenders will want to see how much income has been reported to HMRC as well as proof of the tax paid. The HMRC or your accountant can provide both an SA302 and a “tax year overview” to demonstrate the level of tax paid.

You can print your own tax calculation and "tax year overview" if you do your Self Assessment tax return using either HMRC’s online services or through your accountant’s commercial software. It may be called something different in the software – for example ‘tax computation’.

Be aware that if an accountant has looked at reducing a self employed person’s taxable income, to reduce the tax liability, this could present a problem when trying to prove income to a mortgage lender. If you think you might wish to apply for a Self Employed mortgage at any point in the future, you should speak with your accountant to ensure you do not encounter any avoidable obstacles.

 

How can I give myself the best chance of getting a Self Employed mortgage?

Like any lender, The Cambridge will pay close attention to your income and your outgoings before deciding on your eligibility for any mortgage product. As well as making sure your accounts are in order (see above).

 

What do I do now?

We have lots more information about buying a home and how to get a mortgage. Click through to our Mortgages Help Centre to find guides on applying for a mortgage, repaying your mortgage, remortgaging and more. Or if you're ready to see how The Cambridge could help you, simply fill in your details on our Self Employed Mortgage page and you'll see a list of the Self Employed mortgage products which may be suitable for your circumstances.

If you'd like to discuss your options, you can book a face-to-face or telephone mortgage appointment with an adviser on our website.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.