Self Employed Mortgage Advice
At Just Mortgage Brokers we specialise in acting as mortgage brokers for self-employed applicants, and have the experience and knowledge of how different lenders – from the big high-street banks and building societies to smaller, more specialist lending companies – make these assessments. As a self-employed mortgage broker, our expertise can help you to find the right self-employed mortgage on the market to meet your specific needs and circumstances.
Self employed mortgages
Being self-employed comes in many guises. Different companies have varying strategies on managing balance sheets, cash flow and the distribution of profits and dividends. Whatever the situation our specialist Mortgage Advisers will assess each individual self-employed mortgage on its own merit, making sure they take into account the maximum available income from the company accounts. This could mean they look at retained profits and dividends and many other scenarios that not everyone easily understands.
What are self-employed mortgages?
You may be surprised to learn that technically there is no such thing as a “self-employed mortgage”. In theory this means that everyone applying for a mortgage – whether employed or self-employed – should have access to exactly the same rates and mortgage options.
So what is different? Ultimately, it is the way lenders view income and assess your ability to afford the mortgage. Typically, for those employed on a PAYE basis a lender will be happy to look at payslips that confirm the annual salary of the applicant; however, for mortgage applicants who are self-employed, or a limited company director, the requirements can vary enormously between lenders.
What do I need to get a self-employed mortgage?
When lenders assess income for those that are self-employed, it is generally based on an evaluation of historical earnings, rather than what you are earning today. Typically, the lender will work on an average of the last two or three years’ earnings as verified by either your full accounts, or via your SA302 Self Assessment tax calculation documents (see below for more information about SA302s and how to get them).
With the many various types of self-employment, one size certainly does not fit all when it comes to getting a mortgage; some lenders are better placed than others in lending to self-employed applicants, depending on your individual arrangements. We have experience of helping self-employed people in a variety of circumstances; for example, if you are applying for a self-employed mortgage, 1 year’s account is all you have available, we will help you to find a lender whose underwriting criteria can accommodate this. Other examples of where we can help as a mortgage broker for self-employed applicants include:
- Calculations based on retained profit
- Working with accountants certificates
- Assessments made using latest years figures only
- No accounts required for contractors
- Knowledge of umbrella companies and freelancers
Getting a self employed mortgage
Changes in the mortgage market and in mortgage regulation in recent years have resulted in lenders becoming more stringent in their approach to mortgage underwriting, and taking a much more cautious and risk-averse attitude when assessing affordability.
For self-employed people – including sole traders, partnerships and limited company directors – the process of how some lenders assess mortgage applications can be extremely frustrating; many lenders.
Fortunately, at Just Mortgage Brokers we specialise in acting as mortgage brokers for self-employed applicants, and have the experience and knowledge of how different lenders – from the big high-street banks and building societies to smaller, more specialist lending companies – make these assessments. As a self-employed mortgage broker, our expertise can help you to find the right self-employed mortgage on the market to meet your specific needs and circumstances.
Self employed mortgages without proof of income
Lenders will always require proof of income when a mortgage application is submitted to them. One of the key things that lenders need to assess is a potential applicant’s affordability. This has to be verified and documented. So unfortunately income will always have to be proven. The mortgage market is however moving towards verifying income directly with HMRC and even though this is a work in progress, there are some lenders that will not ask for proof of income for some self-employed or employed mortgage applications. As Mortgage Brokers we are still responsible for verifying and documenting proof of income prior to submitting an application to a lender. The lenders’ move towards verifying income directly with HMRC is more to save them time in their application process than actually offering mortgages that truly ask for no proof of income.
Self cert mortgages
In essence, self cert mortgages were designed for self-employed people with complex incomes to be able to access mortgages by self certifying their income. After a while the schemes were also rolled out to employed people with complex income scenarios. Self cert mortgages were taken out by far more people than anticipated, and after being successfully available for a number of years, it was decided by the regulator that the risk of these mortgages defaulting, far outweighed the benefits of giving access to those that had complex income scenarios. Thus self cert mortgages are no longer available in the UK.
What is an SA302?
An SA302 form is your Self Assessment tax calculation, provided by HM Revenue & Customs. While many mortgage lenders will ask for full accounts (usually between one and three years’ worth) to verify the income of self-employed mortgage applicants, it is increasingly common for lenders to accept SA302 forms instead.
Over 50 lenders accept SA302s printed at home or by an accountant, accompanied by the corresponding tax year overview, while others may ask for originals provided by HMRC. For mortgage lenders, the SA302 provides documentary evidence of your declared income for that tax year, in compliance with affordability rules set down by the Financial Conduct Authority (FCA).
An SA302 summarises the information you submitted to HMRC in your annual tax return, and shows the calculation of your income tax and National Insurance contributions due for the tax year. It breaks down your declared income from all sources including salary, income from self-employment or partnerships, limited company dividends and interest. The calculation also breaks down the total income tax due and the applicable tax rates.
HMRC can provide up to four years’ SA302s and tax year overviews. There are various ways you can obtain these, depending on how you submit your tax returns. If you submit your return using the HMRC online Self Assessment service, you can sign into the website and print the necessary documents directly. If you – or your accountant – use commercial software to submit your annual tax returns, the SA302 can be printed via the software.
If you do not have access to a printer, or if you are applying to a lender who will only accept an original SA302, then you need to request it from HMRC. This also applies if you submit your tax returns by post, rather than online or via software.
To request an original SA302, you can call the Self Assessment helpline on 0300 200 3310, quoting your National Insurance number and Unique Taxpayer Reference (UTR). You can also write to: Self Assessment, HM Revenue and Customs, BX9 1AS. Once HMRC has received your request, you should allow up to two weeks for the requested documentation to arrive.
How much can I borrow for a self-employed mortgage?
Lenders can vary considerably in how they calculate an income figure for self-employed mortgage applicants. Some may base the figure on your most recent year’s declared income, others on an average of the past two or three years’ figures. Lenders may apply different criteria to how they consider direct income, salary and dividends drawn from a limited company structure, and retained profits.
In short, there is no single hard-and-fast rule as to how a lender will calculate your income figure. However, once that figure has been established, the amount you can borrow should be subject to the same lending criteria as anyone else applying for a mortgage with the same lender.
How Just Mortgage Brokers can help
With an intricate knowledge of the mortgage market, particularly of niche areas like self-employed mortgages, our mortgage brokers can help you source and secure the right self-employed mortgage for your circumstances, and assist in maximising your borrowing potential.
We know which self-employed-friendly mortgage providers to approach and those that will work out best for you based on your individual circumstances. We have helped many self-employed customers find a mortgage that suits both their budget and their lifestyle.
Ready to secure your self-employed mortgage? Contact our team today.
How to get the best mortgage deal if I’m self employed
Mortgage lenders will not differentiate between employed or self-employed people when offering their best mortgage rates. To try and truly understand what the best mortgage deal that is available to you, our Mortgage Advisers will analyse the products that are available based on the initial and follow on rates, fees charged by the lender and other hidden costs or benefits associated with the mortgage deal. This usually helps them establish the true cost of a product and will in turn help you get the best mortgage deal based on your specific circumstances.
I've been declined by my bank, can I still get a mortgage?
Being declined a mortgage by your bank is not an indication that you cannot get a mortgage. Each and every bank, building society and lending institution has its own criteria on which they lend on. They even assess a potential mortgage applicants’ credit score on their own internal scoring system. If you have been declined a mortgage by your bank, then it is important that you try and speak to a Mortgage Broker. A Mortgage Broker will assess your situation based on your individual circumstance and then source the most appropriate lender for you. This will not only save you time, but it will also give you the peace of mind that all possible lenders on the market are being looked at, which in effect will put you in the best possible position to obtain a mortgage.
can I get a mortgage using retained profits?
If you are a business owner who hasn’t withdrawn all of the profits from your business, but have instead retained these profits within the business and are looking for a mortgage it may be difficult. Some lenders do not look at retained profits with income. Most lenders will look at a business owner’s dividend income on top of their salary to calculate their affordability. However, if you have retained profits within the business this could work out at significantly more than your dividend income plus salary, which could mean you could afford to borrow much more. There are a number of specialist lenders who will take retained profit into account and these may be added to your salary drawings to produce a figure for mortgage calculations.
If you speak to one of our experts or complete the enquiry form we will discuss your requirements in more detail to establish the best way forward.
can I use dividend income to get a mortgage?
Many lenders accept dividends as income. However, some do not and will look at the net profit of a company instead of the salary and dividends. Generally speaking, if you take a regular salary from your own company plus dividends, these will be added together for mortgage calculation purposes. There may be complications if the combined drawing is greater than the net profit of the business. You should speak with one of our team to make sure the correct figures are used and can be matched to a suitable lender.
self employed mortgages using last years accounts
Each lender will adopt a varied approach to how they use your income from self-employment in a mortgage affordability calculator. Traditionally it was considered necessary to have at least 3 years trading accounts and an average of net profit would be used. However, there are many situations where an individual’s accounts have produced a better result in the last year, be it from market expansion, growth after an initial start-up, acquisitions/mergers or successful tendering etc. If it can be confirmed that the current level of profit is sustainable and not just a “one off”, there are a number of lenders who will consider an application based on this income rather than an average.
Can I get a self employed mortgage with 1 years accounts?
When assessing the criteria of getting a self-employed mortgage, lenders will look at the overall profile of the business accounts. Up until recent years, most lenders had insisted on seeing a track record of 2 to 3 years accounts. This has fortunately changed and there are a number of lenders who have self-employed mortgages available for those that only have 1 years accounts.
getting a mortgage with 2 years accounts
Some lenders may now consider an application if you have 2 years trading accounts and the associated tax calculations. Typically an average of the 2 years net profit will be used for mortgage calculation purposes. Where there is a greater deposit or equity value, lenders are likely to be more accommodating.
Our specialist advisers will be able to review your circumstances and requirements in order to recommend the best way forward.
Can I get help to buy if I’m self employed?
Being self-employed will not disqualify you from getting a Help to Buy mortgage. Our specialist Mortgage Brokers will first source the lenders that offer help to buy mortgages. They will then assess your self-employed position to establish the best lender that will offer you a mortgage on a help to buy application.
Can I get a self employed mortgage with bad credit?
Trying to get a mortgage with bad credit can be a difficult task. Our expert Mortgage Advisers specialise in this very niche area of the market and can help you acquire a self-employed mortgage with bad credit. They have access to not only exclusive products but in some instances also have access to specialist criteria not readily available to every Mortgage Broker.
Self employed mortgage lenders
Self-employed mortgage lenders are the same lenders that lend to employed applicants’. However an application for a self-employed mortgage is assessed using different parameters of a self-employed persons personal or business accounts. The parameters and criteria can be substantially different between lenders, so it is important to speak to a specialist Mortgage Adviser that understands these differences so they can help you achieve the most appropriate mortgage based on your circumstance.
Self employed mortgage broker
At Just Mortgage Brokers we specialise in many niche areas, self-employed being one of them. Our expert Self-employed Mortgage Brokers are trained to understand the intricacies of our self-employed clients’. They will look at a clients’ individual or business accounts and determine how to extract the information so it is presented in a favourable way to a potential lender. This can be the difference of thousands of pounds of extra borrowing if required.Our Advisers understand that every business has different trading strategies and will take this into account when making an assessment. They can even look at clients’ who have trading accounts for only 1 year.