For many new self-employed individuals in the UK, securing a mortgage might feel like navigating a maze. Traditional mortgage lenders often favour applicants with steady employment, leaving self-employed workers feeling uncertain about their options. However, being your own boss doesn’t mean you can’t own a home. Here’s a guide to understanding mortgage options for new self-employed applicants in the UK.
The main hurdle for self-employed applicants is proving income stability. Lenders typically require evidence of steady income over two to three years, which can be challenging for those who are newly self-employed. But don’t worry – lenders are increasingly adapting to accommodate the growing self-employed workforce in the UK, which accounts for nearly 15% of the working population.
Don’t stress about your mortgage – discover how we can help you get approved.
Contact us nowFor many new self-employed individuals in the UK, securing a mortgage might feel like navigating a maze. Traditional mortgage lenders often favour applicants with steady employment, leaving self-employed workers feeling uncertain about their options. However, being your own boss doesn’t mean you can’t own a home. Here’s a guide to understanding mortgage options for new self-employed applicants in the UK.
The main hurdle for self-employed applicants is proving income stability. Lenders typically require evidence of steady income over two to three years, which can be challenging for those who are newly self-employed. But don’t worry – lenders are increasingly adapting to accommodate the growing self-employed workforce in the UK, which accounts for nearly 15% of the working population.
To improve your chances of securing a mortgage, be prepared to provide the following:
Get your accounts prepared and signed by a qualified accountant. This adds credibility to your application.
These help demonstrate your cash flow and spending habits.
Lenders may ask for details of previous employment, especially if it’s in the same field as your self-employed venture.
A larger deposit (20-40%) can offset the perceived risk of lending to a new self-employed applicant.
Specialist mortgage lenders cater specifically to self-employed applicants. They often have more flexible criteria and may accept one year’s accounts or a projection of future earnings.
Some high-street lenders in the UK have self-employed-friendly policies. However, they may still require more documentation compared to employed applicants.
If you’re applying with a partner who has a steady income, lenders may weigh their financial stability more heavily, making it easier for you to secure a mortgage.
If a family member is willing to act as a guarantor, this can help you secure a mortgage with more favourable terms.
While self-cert mortgages were banned, some modern products allow self-employed applicants to prove their income through alternative methods.
Navigating the mortgage landscape as a self-employed applicant can be daunting. A mortgage broker can:
Yes, you can. While it may be more challenging compared to employed applicants, there are mortgage options available. Some lenders accept just one year of accounts or SA302 forms, especially if your business shows strong potential. Specialist lenders are often more flexible with self-employed applicants.
Most lenders prefer two to three years of accounts to assess income stability. However, some specialist lenders or high-street banks accept just one year of accounts or less, depending on your financial situation and the strength of your business.
Not necessarily. Mortgage rates depend on factors like your credit score, loan-to-value (LTV) ratio, and deposit size. If you meet the lender’s criteria and can prove a stable income, you may qualify for competitive rates similar to employed applicants.
Yes, especially if your self-employed work is in the same industry as your previous employment. Lenders may take this into account as evidence of your earning potential and expertise.
Yes, government schemes like Shared Ownership are open to self-employed buyers, provided you meet the eligibility criteria. These schemes often require smaller deposits, making them ideal for those with limited savings.
To strengthen your application:
Some specialist lenders may consider future earning potential, especially if your business shows strong growth. This is more likely if you have a solid track record or projections from a qualified accountant.
Not always. However, a guarantor can help if you’re struggling to meet affordability criteria or if your income is inconsistent. A guarantor (usually a family member) promises to cover your payments if you default.
Absolutely. A mortgage broker can match you with lenders who specialise in self-employed mortgages. They understand lender criteria, saving you time and increasing your chances of approval.
Most lenders require a minimum deposit of 10% of the property’s value. However, a larger deposit (20-40%) improves your chances and can lead to better interest rates.
No, but lenders will assess your income stability and affordability carefully. Your income may need to cover higher deposits or compensate for perceived risk if your self-employment is new.
Yes, joint mortgages are a good option. If your co-applicant has a stable income, it can improve your affordability assessment and make it easier to secure a loan.
Lenders may average your income over the last few years to account for fluctuations. Keeping detailed financial records and showing consistent income growth can help.
No, the mortgage products themselves are the same. The difference lies in how lenders assess your income and risk. Self-employed applicants typically face more scrutiny but can still access the same mortgage products as employed applicants.
We are a hybrid mortgage broker and protection adviser. However, we want to make it clear that we do not have physical branch offices everywhere in the UK. You can get our services over the phone, online, and face-to-face in some circumstances.
Please keep in mind that while we may not be local to you, we may still assist you. Imagine if you had a long-term health issue that needed to be addressed. Would you rather have the person who is closest to you or the person who is the best? Now is the moment to put that critical thinking to work in your search.
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