The flexible and accommodating solution for those who work for themselves
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.
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.
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.
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.
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.
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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:
The above isn’t exhaustive and further documentation may be required depending on how complex your mortgage application is.
If you intend to alter the structure of your business, such as transitioning from being a sole trader to a limited company, it is advisable to delay making these changes until after you have obtained mortgage approval. Lenders prioritise stability, and undergoing a significant business transformation right before applying for a mortgage may raise concerns and potentially affect their decision.
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Self-employed mortgages in the UK do not necessarily have higher interest rates or fees compared to regular mortgages. The cost of the mortgage will depend on factors such as credit score, loan-to-value ratio, and the lender's specific terms and conditions.
Having a bad credit history can make it more difficult to obtain a mortgage, whether you are self-employed or traditionally employed. However, some lenders specialise in providing mortgages to individuals with less-than-perfect credit who are self employed.
Lenders typically assess self-employed income by reviewing tax returns, usually from the past two to three years. They may consider the average income over this period to determine eligibility. Some lenders may also accept other documents such as business accounts, bank statements, or certified accounts prepared by an accountant.
Common documents required for a self-employed mortgage application include tax returns (SA302’s), business accounts, bank statements, proof of identity, proof of address, and details of any outstanding debts or financial commitments.