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What Is Considered Self-Employed?
You are considered self-employed if you work for yourself rather than being employed by a company or organisation. This includes running your own business, freelancing, consulting, or working as a contractor. Unlike salaried employees who receive regular pay, self-employed individuals often have variable income streams that can fluctuate month to month or year to year. This variation can make mortgage applications more complex, as lenders need to ensure your income is stable and sufficient to cover repayments over the term of the loan.
Keep in mind that the definition of “self-employed” can vary between lenders; some may also consider directors of limited companies or those with multiple income sources as self-employed for mortgage purposes. At Mortgage Matters, we specialise in working with self-employed clients, guiding you through the process to help find a mortgage that suits your specific circumstances.
The Mortgage Process Whilst Self-Employed
The mortgage process for self-employed applicants broadly follows the same stages as for employed borrowers, but with extra focus on income verification and affordability. Firstly, you’ll have an initial assessment where your finances and income potential are reviewed. This helps determine which lenders are likely to offer you the best deals. Next, you’ll obtain an Agreement in Principle (AIP), which gives you a clear idea of how much you can borrow based on the information provided so far.
Once you find a property that fits your budget and meets lender requirements, you’ll submit a full mortgage application. The lender will then carry out a property valuation and conduct a thorough affordability assessment, factoring in your self-employed income alongside any other financial commitments.
The process can be more document-heavy due to your self-employed status, making it slower than a standard mortgage application. Our team will support you every step of the way, ensuring all necessary documents are in order, liaising with lenders on your behalf, and addressing any queries that may arise.
FAQs for Self-Employed Mortgages
Most lenders require two years of self-employed trading history as a minimum. This provides them with enough evidence to assess your income and business stability. However, some specialist lenders may accept applicants with less than two years’ accounts, especially if you have a strong credit history and can demonstrate consistent income or have previously worked in the same industry.
Deposit requirements for self-employed borrowers generally start at 15-25% of the property’s value. A larger deposit may increase your chances of approval and can also help secure more competitive interest rates. Lenders view larger deposits as lower risk, especially for self-employed applicants whose income may fluctuate.
Whilst most lenders prefer three years of tax returns, some are more flexible and may consider applications with two years or even alternative proof of income, such as accountant-prepared accounts or bank statements. Mortgage Matters can help you identify lenders who offer more flexible criteria and assist you in gathering the right documentation to strengthen your application.
Getting a mortgage can be more challenging when you work for yourself, as lenders often view self-employed income as less predictable compared to salaried income. This means they require more detailed proof of your earnings and financial stability, such as multiple years of accounts and tax returns. However, with accurate documentation and professional guidance, many self-employed borrowers successfully secure mortgages.
The amount you can borrow depends on your income, credit profile, existing financial commitments, and the lender’s criteria. Lenders usually calculate affordability based on an average of your income over the last two to three years. Working with a specialist broker can help you identify lenders willing to consider your unique financial situation.
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