Self-employed mortgages guide 

What counts as self-employed when applying for a mortgage?

If you have more than a 20% share of the business from which you get your main income, most lenders will consider you to be self-employed.

Examples of self-employed roles include:

• Locums – you stand in temporarily for someone else in the same profession (for example, a doctor or dentist)
• Supply teachers – you take the place of a full-time teacher when they are unable to be there
• Freelancers – you’re employed by a number of different companies to work on specific tasks
• Business owners – you are responsible for the day-to-day running of a business (for example, a GP surgery or dental practice)
• Independent contractors – you work for one client for a set period of time
• Sole traders – you run your own business and keep your profits

Usually, mortgage providers will ask to see proof of your income for the past two years in order to progress your application.

Other factors that can help to support your application include a good credit history, evidence of regular work and proof of any future commissions.

How are mortgages for self-employed people different to regular mortgages?

Simply put, they aren’t. The process of applying for a mortgage as a self-employed person is the same as applying for a regular mortgage – but the way you prove your affordability is different.

As a self-employed person you may not have payslips to prove your income. If this is the case, lenders will need to see certain documents to assess whether you can afford to borrow the amount of money you need to buy a home.

To prove your income, you may be asked to provide:

• Two or more years’ certified accounts
• SA302 forms and tax year overview from HMRC (usually for the past two or three years)
• Evidence of upcoming contracts (if you’re a contractor)
• Evidence of dividend payments or retained profits (if you’re a company director)

If you only have accounts for one year (or less), it may be difficult to convince a lender that you can afford to repay a mortgage – but it’s not impossible.

If this is the case, speak to our mortgage team who will be able to provide expert guidance tailored to your circumstances.

What else do I need to supply for a self-employed mortgage?

Alongside evidence of your income, you may also be asked to provide the following documents in order to prove your identity and proof of address:

• Your passport
• Your driving licence
• A council tax bill
• Utility bills (dated within three months)
• Six months’ worth of bank statements (personal and business)

To make sure you can afford to pay your mortgage repayments, lenders will ask for copies of your bank statements to see how much you spend on bills and other monthly outgoings.

They may also enquire about outgoings such as travel costs, childcare, credit card and store card repayments, loan repayments and car finance agreements.

If you’re self-employed and own a small business, your mortgage provider could also ask for additional information on operating costs, business insurance information, commuting expenses and car or other vehicle leases.

How long do I need to have been self-employed before applying for a mortgage?

For most lenders, you will need to have been self-employed for at least two years before applying for a mortgage. If this is the case, you will need to be able to show your accounts from this period of time.

Some mortgage providers will consider your application after just nine to 12 months, but you’ll need a strong track record of work in your industry and proof that your income is sustainable enough to get approved under these circumstances.

Are self-employed mortgage rates higher than regular mortgages?

If you’re applying for a mortgage as a self-employed person, you won’t necessarily have to pay a higher rate. If you can provide good evidence of your income, there’s no reason why you can’t access the same mortgage deals as someone in a similar, full-time job.

Like most regular mortgages, your rate is much more likely to depend on the size of your deposit and your credit history. Generally speaking, when you're saving for a house, the more deposit you put down the better your mortgage rate will be. Your rate may also be improved by maintaining a good credit history.

If your chosen bank refuses to accept your application, you may need to get in touch with a specialist mortgage provider that deals with self-employed borrowers. In this case, you may find that your rate is higher.

Can I self-certify my mortgage?

No, you can’t self-certify your mortgage. Self-certified mortgages allowed people to apply for a mortgage without having to prove their income, but were removed from the market by the Financial Conduct Authority (FCA) in 2009.

Although you can no longer self-certify your mortgage, there are still many ways you can buy a property.

If you’re worried about being able to prove your income, it's worth speaking to a Specialist Mortgage Adviser who will be able to provide expert guidance to ensure your mortgage application has the maximum chance of being accepted.