Self-Employed Mortgages

What is the difference between someone who is Self-Employed and a Limited Company Director?

A Limited Company Director would normally be somebody that is a 20% or more shareholder of the company. A Limited Company Director is also assessed slightly differently to a Sole Trader. Many Company Directors take a small basic salary which is topped up with dividends, and some lenders will assess this income.

Other lenders may use the retained net profits of the company, so they would look at that individual’s share of that company’s profits. This sometimes means they achieve significantly more affordability than when the lender is looking solely at their dividends and basic salary.

What documents do I need when applying for a Self-Employed mortgage?

This is fairly standard right across the board, the majority of lenders would want what they call SA302 (tax year overview and tax calculations) which you can obtain from HMRC or via your accountant, who would normally have their own system. The lender may also want to see accounts for the business to assess its performance.

For example, a Limited Company Director who is a 100% shareholder (owns the whole company) and on a large salary, would not necessarily be able to borrow based on that full salary, if the business is making a loss. The Director can pay himself whatever salary he want but this doesn’t mean that the Company can afford to pay it or that the wages are sustainable and that’s why Lenders look at the performance and profits of the business.

It is worth speaking to your accountant and getting a copy of the last two years accounts, tax reviews and tax calculations prior to speaking to a broker, because with that sort of information we can ordinarily work out how much you can borrow, and approach a lender that specifically assesses your situation favourably.

Is Buy to Let available for the Self-Employed?

Yes. It actually may be a little bit easier in a lot of cases, because the majority of Buy to Let lenders assess the mortgage based on the expected income from the property itself, rather than your own personal income. They’re more interested with how much yield (or rent) that property will provide, and will work their assessments and calculations based on that. Some lenders require tax overviews and tax calculations, but others may not, if they are satisfied with the yield.

How does Remortgaging work for the Self-Employed?

Again, there are no differences whatsoever compared with an employed person. You are asked to provide evidence of your earnings, so for an employed applicant you’ll be asked for the last three months payslips and the latest P60, whereas a Self-Employed applicant would need to present their accounts or tax calculations.

Each lender has slightly different criteria and it can be really beneficial seeking out a Mortgage Broker to help you find the lender who looks at your income more favourably, as this may have a huge impact on the amount you’re able to borrow. Whether you run a Limited Company or are a Sole Trader seeking independent mortgage advice is highly recommended.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE