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How to get a mortgage if you are Self Employed.

Secure your financial independence with a Self Employed Mortgage - the flexible and accommodating solution for those who work for themselves.

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We often get asked if a self-employed person or a sole trader can get a mortgage, the answer is yes!  This is a specialist area, and you need to make sure you work with a Mortgage Broker who not only understands mortgages but accounts too, as these types of mortgages are tailored to different trading styles.

Here at Hello Mortgage, we have an ex-accountant who looks after our self-employed team to make sure the advice you get is tailored to your specific needs.  Understanding your accounts is a key consideration when applying for a sole trader or self-employed mortgage.

In theory mortgages for contractors or self-employed people are no different to standard mortgages, but the way they are assessed is different.  A standard mortgage application for an employed person is typically based on their payslip income and outgoings.  This isn’t the case for self-employed/sole trader mortgages where the income validation requirements are much more in-depth.

Can Sole Traders get a mortgage?

There are options available to sole traders but there are often additional requirements such as a lower Loan to Value, minimum trading requirement and how your accounts are prepared (most lenders like you to use a qualified accountant).  

You can waste a lot of time trying to source your own self-employed/sole trader mortgage. To make sure you get the best possible results you should use a specialist Mortgage Broker.

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How do I prove my income and how long do I need to have traded for?

There are many myths about the minimum trading period for the self-employed/sole trader.  Typically, you should have at least 12 months of trading history before you apply for a sole trader mortgage.

Be careful of brokers who say you can get a mortgage with 6 months of trading or even 3 as it's not that simple.  Other factors like continuous employment, a second applicant, if the mortgage is for a buy to let can reduce the minimum trading time, but not in every case.

To make sure you have the best possible chance of success a self-employed person or sole trader should have at least 12 months of trading history and should also speak to a specialist Mortgage Adviser.

  1. Self-employed in a Limited Company
    We strongly recommend you have your annual accounts prepared and filed by an accountant.  This will give the lender comfort that your numbers are correct and independently checked.  The lender will use your accounts to assess your income. Your income may be more complex and include elements of PAYE, Dividends and other income such as investment income.  Our team of specialist sole trader Mortgage Advisors are experts in dealing with complex income and will work with you to make sure as much of your income as possible is used towards your affordability.
  2. Contractor or Freelancer
    You should expect to be asked for your 4 most recent contracts, a copy of your SA302s/tax calculations and a copy of your HMRC tax year overview.  It always helps if your tax return is prepared and filed by an accountant, rather than yourself.  The lender will use your filed tax returns to validate your income and assess your affordability. There may be other considerations depending on the type of contract you have and the sector you work in.  Mortgages for IT consultants are vastly different to Mortgages for Agency Workers, with many lenders wanting to see at least 12 months of continuous employment.  You may find that some lenders want a minimum notice period of 3 months for contractors.
  3. Sole Trader
    You will generally be expected to produce your last 3 years SA302s/Tax calculations.  You may also need to produce additional personal current account statements or explain how your income is generated. There are a small number of lenders who will consider self-employed applications with 1 year’s accounts.

What documents should a self-employed person or sole trader provide?

Most lenders ask for the same documents, however, your Mortgage Broker will ask for additional documentation to ensure the mortgage we recommend is the best fit for you.

Your Mortgage Broker will request:

  1. 1 to 3 years SA302’s
  2. 3 months business bank statements
  3. 3 months personal bank statements
  4. Photo ID
  5. Details of any additional income
  6. Your credit reports

The above isn’t exhaustive and further documentation may be required depending on how complex your mortgage application is.

Can I have a self-certified mortgage?

No. The Financial Conduct Authority banned self-cert mortgages in 2010 due to the risks associated with them.  With a Self-certified mortgage, you specified how much you earn when you applied without supplying any documents to prove your income.  Self-certified mortgages were heavily abused, and a lot of people found themselves unable to make their monthly repayments.

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Are sole trader/self-employed mortgages classed as a commercial mortgage

If you are applying for a mortgage to purchase your main residency the answer is no.  If you were applying for a mortgage to purchase an investment property or a property that you will let out, then the answer is yes.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.