Self-employed mortgages

Getting a mortgage can be difficult if you're self-employed, but it's not impossible. In this guide we'll look at some of the hurdles you're likely to face, and how you can overcome them.

How to get a self-employed mortgage

Raising a deposit

These days, the biggest challenge for first-time buyers is saving a large enough deposit. When you're self-employed, investing in your business often takes priority, which can make saving even more of a challenge.

The good news is that self-employment usually means you're good at making and sticking to a plan, which is the key to meeting any financial goal.

Use our savings calculator to work out the rate at which you need to save each month. You might need to adjust your monthly budget to maximise your saving power.

Make sure you're saving effectively; compare savings accounts for the best interest rate, and make use of your ISA allowance so that tax doesn't eat into your returns. If you know you'll be saving for a couple of years, a longer-term savings product such as a fixed-rate bond could help you to make the most of your money.

Approaching lenders

In theory, you'll have access to the same range of mortgages as any other borrower – so you should take some time to consider what type of mortgage would suit you best and compare rates.

However, some lenders will be more comfortable lending to a self-employed person than others, so you will probably need to approach the ones you're interested in in person before making an application – remember that making too many applications can affect your credit rating. Some lenders may require a larger deposit from you, while others may offer mortgages especially designed for self-employed borrowers. To help you work out which lender is best suited to your needs, you may want to use a mortgage adviser who can offer whole of market advice.

How to pass the affordability checks

Proving you have a stable income is less straightforward than if you're an employee. Here are a few tips to help you through lenders' affordability checks:

  • Prepare for the mortage affordability questions thoroughly before you apply.
  • Make sure you can produce at least two years' worth of company accounts and/or tax returns as evidence of your income.
  • Be prepared for lenders to look at your spending habits for evidence of good money management (this now applies to anyone looking to get a mortgage).
  • Try to provide evidence of work lined up in the future, to prove that your income is stable.
  • Carry out your own "stress test" to make sure you could still afford the monthly repayments if interest rates were to rise.

You should also plan ahead and make sure you're not setting traps for yourself. For example if you have an accountant, they will probably use legal methods to reduce your taxable income where possible – but this could actually make it harder when it comes to getting a mortgage.

Next steps for self-employed mortgages

Take a look at some of our other guides to help you with the mortgage process:

Compare mortgages to find the best deal for you.

Last updated: 21 May 2015