How To Get A Mortgage When Self Employed

Lady working at a desk

Getting a mortgage when you are self-employed is typically viewed as a much harder process than being employed. This is more so due to the pandemic’s effect on the overall financial landscape, causing lenders to be more stringent when lending money. [1]

However, the process of getting a mortgage while self-employed is almost the same as getting one whilst in full-time employment. It just requires you to have more documentation of past income, so you’re able to pass the lender’s affordability test. This is the same for any other individual looking to borrow money.

What documents are needed for a self-employed mortgage?

Diary and pen

The increased amount of credentials needed against your income is because there isn’t an employer who can prove your salary. Below shows the documents needed for different types of self-employment in order to get any type of mortgage.

1. Employment History

If you work as an employed worker alongside your self-employment, you’ll need between three to six months’ worth of payslips and P60s. If you receive a substantial amount of additional income due to commissions or bonuses you may be asked by your lender to provide up to two years’ worth of payslips and P60s.

2. Limited company directors

Directors for limited companies will need to have between one-two years’ worth of signed-off accounts depending on your lender’s requirements.

3. Personal tax overview

If you’re self-employed, you’ll need to request three or more years of SA302’s and a total tax overview from HMRC. You’ll get these each time you submit your end-of-year self-assessment but can request to gain access to the paperwork if it’s been misplaced over the years.

Again, depending on your lender you may not need three years of SA302’s or tax overviews as it really depends on many other factors and their policies.

4. Contractors

You must have at least the last 12 months of fully signed contracts. On these contracts, it’s required to clearly state your day rate in Sterling and a start and end date on each contract. If you’re a contractor, you may be aware of rolling contacts, this is also acceptable if signed off by all parties.

5. Insurances and protections

A lot of the time, lenders will ask for evidence of certain types of insurances to ensure you’re able to pay if any unfortunate circumstance were to arise. This will include insurance like income protection, life, PPI, etc.

6. Construction Industry Scheme (CIS) workers

If you’re part of this scheme that is also known as Umbrella contractors, you’ll need to gather at least six or more months’ worth of payslips.

Further mortgage application documents required

Looking through charts

Above you should be able to see what paperwork is needed in order for you to apply for a mortgage depending on your self-employment status. Apart from the paperwork that is dedicated to your role, you’ll also need the below basics, like any other borrower.

  • Valid identification
  • Proof of current living address
  • At least three months of bank statements
  • Statement of current funds

Providing these is standard practice for most mortgage lenders. This gives your lender a better understanding of your financial situation, how you gained access to your deposit, and to clarify you are who you say you are.

Once you have all of the above, you’ll be on your way to getting your mortgage!



Sources

1. https://www.mortgagesolutions.co.uk/news/2021/03/22/lenders-tighten-self-employed-affordability-mbt/

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