Everything That You Need to Know about Getting a Mortgage When You are Self-Employed

For many people, working for yourself can provide the freedom and flexibility to achieve the career of your dreams. But many worry about the impact self-employment can have on finances – especially when it comes to mortgages.

Being self-employed doesn’t mean that getting a mortgage should be difficult. We at Newcastle Building Society welcome mortgage applications from self-employed borrowers, and there are many practical steps you can take to ensure that you are in the best possible position to apply for a mortgage.

Below we’ve created a guide to some of the frequently asked questions that you may have when looking to get a mortgage as a self-employed person, including tips on how to address common issues and make sure you have everything you need for your mortgage application.

What counts as self-employed?

There are nearly 5 million self-employed people in the UK, according to the Office for National Statistics. From writers to artists, plumbers to accountants, today’s connected world means that it’s possible to work for yourself in nearly any sector.

A lender will usually class you as self-employed if you own more than a particular percentage of a business – around 25 per cent.

Being self-employed does not mean you can’t apply for a mortgage. At Newcastle Building Society, we recognise that a changing economy means more and more people work for themselves and we welcome mortgage applications from self-employed borrowers.

So whether you are looking to buy your first property, or simply looking for a new place to call home, applying for a mortgage needn’t be a headache.

How can I get a mortgage if I am self-employed?

If you are self-employed, you can apply for the same range of mortgage products as any other borrower, as long as you can prove that you can meet the payment requirements and have the necessary deposit.

When applying for a mortgage when self-employed, you will need to:

  • Prove the income that you are declaring by showing your business accounts, or provide an accountant’s reference. Lenders will usually need to see three years’ worth of proof of income, so make sure you have these ready to present with your application.
  • Show what business or contracts you have for the coming years. This is to demonstrate that you will earn a similar income in the future.
  • Present your tax returns, either through self-assessment or with a SA302 form from HMRC. This will show the total income you have received and the total tax to pay.

Do self-certification mortgages still exist?

Self-certification mortgages have not been available in the UK since 2011, due to FCA affordability rules. This means that if you are self-employed, you must provide proof of your income when applying for a mortgage. Read on to find out what counts as proof of income when working for yourself.

How many years of accounts do I need to get a mortgage?

Being able to provide proof of income is important for anyone looking to apply for a mortgage. For self-employed borrowers, it’s important to consider the following:

  • Lenders will look at how much you can borrow by calculating your credit score and income. This can sometimes be complicated if you are self-employed, as you may receive your income in different ways, rather than as a salary
  • You may have bad months and good months, meaning your income changes and can be difficult to predict over a set period of time
  • This means that you should keep your records up to date and be able to provide three years’ worth of accounts to support your mortgage application.

What if I’m only recently self-employed?

Newcastle Building Society offers a range of mortgages for self-employed borrowers, including a range for those who have been trading for two years and under.

If you are recently self-employed and choose to apply for a mortgage with us, we will assess your case on an individual basis, using either one year’s accounts or an SA302 form.

For an idea of how much we could be willing to lend you, use our simple online mortgage affordability calculator here. And for more helpful information for all types of buyers, take a look at our blog posts ‘Estate Agent Fees and What They Cover’, and ‘What to Look for When Viewing a House’, which includes a useful house viewing checklist that you can download and take with you to your property viewings.

We hope you’ve found this guide helpful. If you have any further questions about applying for a mortgage, or the mortgages Newcastle Building Society has available, please contact us today! You can book an appointment at your local branch, or call us on 0345 606 4488 to speak to one of our qualified mortgage advisers.

Your mortgage will be secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.