Self Employed Mortgages

We formed Active to help people just like you.

If you are reading this then it is probably because you have discovered that securing a mortgage whilst being self-employed is not easy, you may have been turned down by high street banks who provided mortgages to your friends and family but not to you. Unfortunately, this is the reality many self-employed individuals face when looking for a mortgage to buy their own property.

We formed Active to help people just like you. People who have the bravery, initiative, and gumption to start up their own business, should be able to use their successes to secure a mortgage and it should not feel like an up-hill battle where the system does not seem to be on their side.

Providing self-employed clients with expert advice and guidance and liaising with mortgage lenders to find the best possible deals is our raison d’être, it is at our core, it is our purpose. We have success rates that are industry leading so speak to Active to have a consultation about how we can help you purchase your first or next property.

We formed Active to help people just like you

An applicant for a standard mortgage on a residential property requires proof of income from their employer to show that they have a steady flow of money coming into their bank accounts which proves the likelihood that they can be relied on to pay back the mortgage to the bank. Lenders will use this income level to assess the total amount of finance that they are willing to lend, usually 4-5 times the annual salary.

But someone who is self-employed, as a contractor, a sole trader or a company director etc. does not have a set annual salary so cannot “prove” their reliability in the same way. Work can be irregular or infrequent or fluctuating, the money might stay in the business rather than be taken out by the business owner, making it difficult to prove affordability to pay back a mortgage loan. So, many high street lenders will simply wash their hands of them rather than adapt their procedures and protocols to work with self-employed individuals.

This is why you then need Active! We work with mortgage companies that see your worth and see the value in what you do and wish to help you make your property purchase. We are liaising with these lenders day in day out to help our clients not just secure a mortgage but also ensuring that they get the best deal possible, with attractive interest rates and payback terms.

We have strong relationships with a broad range of lenders, so we have prior knowledge and understanding of what is available to you before you even contact us, making it as smooth and hassle free as possible. This also means we can get you approved for your mortgage faster, we understand what these lenders need and what they want to see.

What is needed for a self-employed individual to secure a mortgage?

Ever since the financial crisis of 2008/2009, mortgage lenders will no longer accept self-certification to approve a mortgage for a self-employed applicant. Legally, you now need to prove your earnings, ensuring that you are going to be able to afford to pay back the loan, and that the lender has made a responsible decision giving you a mortgage.

A SA302 form from HMRC is often all that is needed to show your income for each year, as well as the tax that is owed. The SA302 form is available to download from the HMRC website.  

In the majority of cases, lenders request at least three years of accounts and for many businesses that is likely to be easy enough to achieve. However, if you have not been trading for very long and only have one or two years of accounts, a mortgage may be a tad trickier to secure.

Use our self-employed mortgage calculator today to see how much you could borrow and what type of mortgage rate you might be able to get.

Let us guide you through the process

Our preparation tips for successfully applying for a mortgage if you are self-employed include:

Step 1

Prepare your certified earning reports for as far back as possible, at least two years but some lenders may ask for 5 years. So it’s best to have as many as you can. You need to show that your business is profitable.

Step 2

HMRC tax reports – for at least the last two years

Step 3

Contracts – you need to prove that your earnings will continue. Remember you are proving to a lender that your business is secure, and they can be confident in your ability to pay back the mortgage. This could potentially be more important if your business has had a slower year recently.

Step 4

Use a chartered accountant to sign off your accounts; a mortgage lender will look more favourably if you do.

Step 5

Check on your credit score and look at improving it before the application. This can be done in a number of ways: ensuring you are paying off as much credit card debt as possible; you are on the electoral roll; and paying your bills on time.

Active the self employed mortgage experts

From reading all that, it is pretty clear that whatever your circumstances are, if you are self-employed securing a mortgage with a high street bank is not going to be straightforward or in some situations even possible. This is why Active exists, to facilitate this for you. We want to make your dreams of owning or refinancing property a reality and specialise in doing this for those that are keeping our country running and make up the overall majority of our country. So, contact us today to start your conversation to start your journey towards that home you have always wanted. Booking a consultation is easy, simply click on the button below and we will contact you shortly.

Further information

As a self-employed business owner applying for a mortgage, you will need to prove your earnings. However, if you have only just started trading and only have one year of accounts, you are going to need to prove that your business is viable, and your income is going to be stable enough to afford to pay the mortgage back. Providing contracts for future work, a detailed business plan and a projection report from a chartered accountant are types of typically requested evidence.

Many high street banks will not provide a mortgage for a self-employed applicant with only one year of accounts, however, there are specialist lenders available who are willing to work with you and your circumstances. Finding those lenders and securing a decent mortgage deal is no easy mission; you should seek the assistance of one of Active’s expert mortgage advisers who have helped copious numbers of clients in similar situations over the years.

Absolutely! There are actually some high street banks who will provide a mortgage for a self-employed applicant with only two years of accounts, however, there are also specialist lenders available who have fewer restrictions than high street lenders who specialise in self-employed mortgage applicants. These are the lenders we work with closely and who often offer better deals to self-employed clients. We have excellent relationships with mortgage lenders that are happy to supply a loan to you based on your most recent income rather than taking an average of your earnings.

Contractors, by the very nature of their job, are employed for a certain period, this might be for the length of a project or a pre-specified amount of time. Freelancers are similar and will be employed by various different employers to produce work for them. Typical freelancing jobs might be journalists, content creators, graphic designers etc who will be paid for a specific job. Acting as well is a common career where income is sporadic and fluctuating. This makes proving your income to a mortgage company more complicated and these professions again will find it hard to secure a mortgage with their erratic income structure.

At Active we understand the needs of contractors and freelancers and we specialise in helping this community secure the best mortgage and property refinancing deals on the market. Each applicant has an individual set of circumstances and there is no blanket rule or deal for every freelancer and contractor when it comes to mortgages. Each applicant, like each contract or project that you work on, is unique, so our advice is bespoke to your individual requirements. This expertise in finding mortgage deals for contractors and freelancers is just one part of what makes our advice different.

It is commonplace for directors of limited companies to pay themselves a salary that is below the next tax threshold, retain more profit in their businesses and pay themselves a large dividend. Tax on dividends is lower than on income, so it makes sense for directors to do so, to maximise their income levels.

However, many high street banks will only consider the applicant’s personal salary income, which can be significantly lower than their real take-home amount. This, therefore, limits the amount the bank is willing to lend you, despite being the director of a (hopefully) profitable business.

There are options though so do not worry. It is just advisable for you to find a lender who specialises in mortgages for self-employed company directors looking to make their property purchase. These specialist lenders will consider your circumstances and your dividend payments as well as all other criteria that self-employed directors need to meet. That is where Active come in, because we work with these types of lenders every day. We have a dedicated specialised team that liaise with the types of lenders who see the bigger picture and take into account your dividend and bonus payments rather than just your monthly salaried income. You are in safe hands with Active, we can do the hard work for you so you can focus on running that business.

Absolutely! We offer advice for anyone looking for a mortgage, however complicated and just like company directors, contractors etc sole traders and partners have a similarly complex time arranged a mortgage to purchase property. This is absurd when you think about the fact that 76% of private sector businesses do not employ anyone aside from the owner(s). 56% of these businesses are sole traders, and 20% in partnerships. This is a huge number of people and business owners that are keeping this country running and our economy growing. With everything that we have all been through with the Covid-19 pandemic, it is often the small business owners who struggled the most and we see the benefit from supporting those that have survived and are in a position to purchase property.

Active can help you with expert advice and liaising with mortgage lenders who see the value in sole traders and partners and provide mortgages deals that are competitive. We will find the right deal for you to save you time, energy, and money. The last thing business owners who are sole traders and partners want to be doing is stressing over mortgage applications and refusals and paperwork, when you have a business to run and families to support.

Ultimately, it is not too dissimilar to what is required from an individual looking to apply for a standard mortgage, it just requires more of it. The best way to prepare for a mortgage application, as an Active adviser will go through with you, is to prepare as much as you can before the phone call with our mortgage adviser. Make sure you have records from your current accounts, saving accounts, credit cards etc as normal but then you need to have any other financial records of income that you might be receiving, e.g. pension schemes, dividends, trusts etc. You should also have a record of your assets as well. You are proving your wealth to the adviser who in turn will do so to a bank so the more prepared you are, the more likely that you are going to be approved for a mortgage.

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