Mortgage lenders have stricter income evidence requirements for self-employed individuals and business owners. You need to prepare early and plan for the appropriate timescales to make your house-buying journey as smooth as possible and make sure you have the correct documentation ready.
Whether you’re a sole trader, limited company director, or contractor, I can help you understand how different lenders assess self-employed income and identify mortgage options suited to your circumstances.
Planning Your Timescales
Getting a mortgage as a self-employed trader or business owner can mean needing to be more patient than for employed mortgage applicants. Lenders need to see at least 1 full year HMRC tax and income reporting or accountant-prepared company accounts in order to assess affordability for self-employed applicants. This means a full tax year from 6 April – 5 April.
For the best interest rate options and the widest choice of lenders, it is more ideal to have two full years of accounts available. Lenders have different criteria for assessing recent income. It’s normally an average of the last two years net profit for sole traders or salary plus dividends for limited company directors. However, some lenders will be more flexible and accept the latest year’s figure if it is higher or take into account investment in business development or equipment that has temporarily reduced profit in one year.
This means you need to carefully plan the timing of your house-buying journey with your income expectations from your business to ensure it will be stable and sufficient for the property price you wish to purchase.
Documentation Required
Self-employed mortgage applicants will need to provide additional documentation on top of other standard mortgage documentation requirements (such as ID, bank statements, proof of address).
If you’re self-employed as a sole trader, for income evidence you’ll need to provide:
- SA302 forms
- Tax Year Overview forms
If you’re a limited company director or shareholder, for income evidence you’ll need to provide:
- Company accounts
- Tax Year Overview forms
- SA302 forms or payslips if you receive PAYE income
If you’ve recently changed from being a sole-trader to a limited company, and it is in the same business or skill industry, some lenders can take your previous history into account by exception. I can help you negotiate this with an appropriate lender.
Ready for Next Steps?
Every self-employed business is different, and lender criteria can vary considerably. If you’re unsure whether you have enough trading history or how your income will be assessed, it’s often worth having a conversation before you start viewing properties. I can explain your options, help you prepare and work with you to secure a successful mortgage offer.
If you’d like to discuss your plans or have any questions, feel free to get in touch for a Quick Chat or message me on Whatsapp.