Joint Mortgage One Applicant Self-Employed
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Joint Mortgage One Self-Employed
Can you get a joint mortgage if one applicant is Self-Employed?
If you’re looking to buy a property with a joint mortgage, where one applicant is self-employed and the other applicant is a PAYE earner, you’ll be pleased to know that it’s perfectly achievable and in fact, differs very little to an application where both applicants have the same employment type.
There’s a bit of a myth surrounding self-employed mortgage applicants having a hard time to secure a mortgage and whilst this has been true to some degree in the past, currently it’s no more difficult to get a mortgage as a self-employed person than it is as an employed person, provided you can prove your income.
Mortgage Lenders are slightly more cautious with the proof of income for self-employed applicants, which means they will usually want to see two to three years of stable income rather than the three months required for PAYE applicants. The only difference therefore, when applying jointly as one self-employed and one employed, is the amount and type of proof of income that will be required.
How much can you borrow if one applicant is Self-Employed?
Mortgage loans are based on the joint affordability and credit scores of the applicants; the fact that each applicant earns their income in a different manner has no relevance to the affordability. Provided the Mortgage Lender is confident that jointly, you can afford the repayments on your mortgage, the type of employment won’t have an impact on your borrowing.
For a Standard Residential Mortgage most applicants could expect to borrow between three and five times their income or, in the case of a joint application, their combined income. Your credit scores, affordability and income stability will influence the multiple of your joint income that is offered.
What documents do you need if one applicant is Self-Employed
For the self-employed applicant, lenders will want to calculate an average annual income over a duration of around two to three years, which is why they ask for proof covering this duration. In some circumstances it’s possible to find lenders that will look at just one year of accounting history, so it’s worth speaking to us if this applies to you.
The purpose of using an average income is to gain a clearer long-term earning potential for a fluctuating income stream, which is common in self-employment. This mitigates some of the risk involved in lending. The type of evidence you will need to provide will vary, depending on the type of self-employed work you participate in:
To prove your personal annual income you will usually need to provide:
- Certified accounts
- Tax Calculations and Tax Year Overview from HMRC tax returns
Some lenders will treat your application in the same way as a Sole Trader, others will use an annualised version of your day rate, if that is your standard payment type. Proof required is:
- Accounts and Tax Calculations and Tax Year Overview from HMRC forms (OR)
- Evidence of day rate
- Proof of ongoing contracts of employment are usually required in either case
Your personal income and dividends are used to calculate your loan, with some specialist potentially willing to look at your net business profit as well.
Part owners must own 25% or more for the income derived from that ownership to support their mortgage application. Your share of the net profits forms the basis of this calculation.
Proof of income includes:
- Certified accounts
- Tax Calculations and Tax Year Overview from HMRC forms
- Business banking statements
- Also sometimes required – Future projected income and business plans
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Does a mortgage have to be in joint names?
Two people can jointly own a home where only one name is on the mortgage, provided they are both named on the deeds to the property.
It’s worth considering however, that a joint mortgage application will give you access to higher lending amount, unless there is a specific reason not to include an applicant, i.e the individual has history of bad debt/poor credit.
How can a Mortgage Broker help if one applicant is Self-Employed?
At Mortgage Co our experience Mortgage Brokers specialise in helping self-employed applicants. We can access those lenders who are able to offer competitive deals to a wide range of self-employed applicants, whether you’re applying jointly with a traditionally employed person or have a shorter trading history.
Our comprehensive knowledge of lenders current criterias will allow us to ensure that you’re fully prepared before you apply for your mortgage, further improving your chances of achieving a successful application.