Self Employed Mortgage

Self Employed Mortgage Advice
in Leamington Spa & Warwickshire

The term 'self-employed' covers various different business types, spanning across sole traders, partnerships, contractors and limited company directors.

Businesses adopt different methods for distributing profits, whether it be via PAYE and/or dividends. Not all mortgage advisers are familiar in concepts such as retained profits, dividends, and the range of factors we examine when evaluating your mortgage eligibility. Our expert team is equipped to accurately assess each self-employed mortgage, taking into account the unique attributes of each situation, to ensure that the maximum attainable income from company accounts is utilised.

Is it harder to get a mortgage if I'm self employed?

In short, yes – there's no denying that securing a mortgage becomes more demanding for those who are self-employed. The path to having your mortgage approved involves more hurdles compared to being employed.

How much can I borrow on a self employed mortgage?

Each lender will have its own unique considerations, and regardless of whether you're self-employed or employed, affordability remains an important factor.

For limited company directors, many lenders will seek insight into your salary and dividend distributions. If your business retains profits for future uncertainties or reinvestment purposes, some lenders might even assess your net profit in conjunction with your salary and dividends. This often results in a higher figure, potentially enabling you to qualify for larger mortgage amount.

Sole traders, on the other hand, typically have their lender assess their net profit. However, this also varies between lenders. To navigate these intricacies, it's highly recommended to speak with an adviser who can provide tailored guidance.

What documents do I need to provide when applying for a self employed mortgage?

When applying for a mortgage as a self-employed individual, organisation of your documentation is essential.

Many documents can serve as evidence for self-employed income, typically tax calculations and overviews from HMRC, company accounts spanning two to three years (dated no older than 18 months), a three-month history of business bank statements, as well as standard identification documents like a passport or driving license, along with personal bank statements.

If you have an accountant, they can provide tax calculations (also referred to as SA302) and HMRC tax overviews upon your request.

How is my income assessed for mortgage affordability if I am self employed?

Each lender has their own document requirements, A growing number of lenders now request business bank statements to prove business sustainability, leading to challenges for numerous prospective homebuyers.

For limited company directors, relying solely on payslips isn't sufficient, as lenders are aware that salary adjustments could be manipulated before and after the mortgage application. To ensure transparency, it's advisable to validate your historical earnings.

If you're self-employed and intend to apply for a mortgage, seeking advice early is highly recommended. Engaging with a broker is invaluable, as while one lender might decline your application, another might accept, or one lender could offer more generous terms than another. Consulting with a qualified adviser can be the pivotal factor that determines whether you secure your dream home or have to make compromises.

What is the difference between a sole trader and a limited company director?

Individuals who are self-employed may fall under the category of a sole trader, entailing submission of self-assessment tax returns. Alternatively, if a Limited Company structure is adopted, it's common to have an accountant and receive a combination of salary and dividends from the business. The variation in mortgage application lies in how lenders require proof of income.

For sole traders or partners in a partnership, income evaluation typically centres around the net profit detailed in their tax calculation (SA302). On the other hand, for limited company Directors, lenders delve into understanding your share in the company's revenue and net profit. Simply, the difference is how lenders expect you to demonstrate your income and how they will assess affordability based on the documentation provided.

Can I get a mortgage with only one year's accounts?

Many self-employed people face rejection from their banks because they haven’t been trading long enough. Approximately 95% of mortgage lenders require at least two or three years trading history to gauge the stability of your business and income.

Nonetheless, a handful of lenders will consider one year's accounts. However, it's essential to ensure that you approach the appropriate lenders and engage in suitable discussions with a mortgage adviser.

Looking for self employed mortgage advice in Leamington Spa & Warwickshire?

Jack Bewick offers tailored self employed mortgage advice specialising across Warwick, Leamington Spa, Kenilworth, Stratford upon Avon, Coventry & Warwickshire, Lutterworth & Leicestershire areas.

Offering expert independent mortgage advice on:

First Time Buyer Mortgages

Home Mover Mortgages

Remortgages

Buy To Let Mortgages

Limited Company Mortgages

Affordable Housing Mortgages (Shared Ownership)

Self Employed Mortgages

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