Getting a Self Employed Mortgage
The biggest hurdle to getting a self-employed mortgage in England & Wales is proving your income is stable. Fluctuating profits and complex company structures mean lenders often view you as high-risk, leading to weeks of delays or outright application rejection.
This article provides a clear, data-backed guide on exactly what documents lenders demand, how different business types are assessed (sole trader, limited company, contractor), and the steps you must take to secure your mortgage offer faster and avoid jeopardising your property purchase.
Can you get a mortgage if you're self-employed?
Yes, absolutely. Being self-employed does not disqualify you from securing a mortgage in England & Wales. The difference is the evidence and proof required. Lenders need a robust, traceable history to prove your income is stable and will continue.
The process is stricter than for a typical employed applicant due to the post-2014 Mortgage Market Review (MMR) rules. Lenders must conduct rigorous affordability checks.
These regulations are why self-employed applicants face extensive scrutiny over their accounts and declared earnings, often adding weeks to the application time.
How long do I need to be self-employed to apply?
Most mainstream mortgage lenders require you to have a minimum of two full years of self-employed accounts or Self-Assessment Tax Returns (SA302s/Tax Year Overviews) to consider your application.
However, specialist lenders will consider applicants with as little as 12 months of trading history, especially if you have a large deposit or were previously employed in the same industry. Be prepared for stricter criteria and a smaller pool of lenders if you only have one year of accounts.
Our brokers will present the best options available to you, for any type of mortgage, including:
- First-time buyers, home movers and buy-to-lets;
- Employed; self-employed or director mortages;
- Mortgages for non-UK residents or non-UK citizens;
- Bridging loans;
- Bad credit mortgages;
- Guarantor mortgages;
- Joint borrower, sole proprietor mortgages; and
- Absolute, Possessory, Good, or Qualified Title.
Is it harder to get a mortgage if you're self-employed? The Stress Test
Yes, because lenders must assess two separate aspects of affordability, which is more complex with variable self-employed income:
- Current Affordability: The lender verifies your income based on your declared profits over the last two to three years.
- Future Affordability (Stress Test): Your finances are tested against rules set by the Bank of England's Financial Policy Committee. This ensures you could still comfortably afford the repayments if interest rates rose significantly above your initial rate.
This requirement for long-term certainty over future income is the biggest hurdle for sole traders, company directors, and contractors.
How lenders calculate your self-employed mortgage income
The calculation of how much you can borrow depends entirely on your business structure. A lender is not interested in your company's turnover; they are focused solely on the taxable income you have declared to HMRC, as this is the figure that demonstrates affordability.
A high street lender will typically offer a loan amount of 4 to 5 times your annual net profit or declared income. The method used to determine this annual income varies:
Sole Trader Income Assessment
If you operate as a sole trader, the lender assesses your income based on the net profit declared on your Self-Assessment Tax Returns (SA302s and Tax Year Overviews).
- The Calculation: Lenders calculate your assessable income by taking the average net profit from your last two to three full tax years.
- The Drawback: Because net profit is calculated after expenses and tax-deductible allowances, actively minimising your taxable income to reduce tax (a common practice) will directly reduce the amount a lender believes you can afford to borrow.
Lenders will typically require a minimum of two years of these documents.
What happens if I have an irregular or fluctuating income?
Lenders assess affordability by looking for stability. They typically calculate your average income over the last two to three tax years.
If your income has dropped significantly in the most recent year, some lenders may use that lowest figure as the basis for the loan calculation.
Any major fluctuations or gaps in work history must be fully documented and explained by your accountant to the lender.
Book a FREE(i) consultation with our independent mortgage broker.
- Access to the whole market.
- Not tied down to selling any particular lender's products.
- Determined to get you the best deal possible.
- 100% impartial advice.
- No need for face-to-face meeting.
Self-employed mortgage document checklist (the essentials)
Preparing the correct, up-to-date paperwork is the single fastest way to prevent application delays. You will need the standard ID and address proof, plus the specialist financial evidence below:
Document Required | Why the Lender Needs it | Minimum Required |
|---|---|---|
Document Required SA302s & Tax Year Overviews | Why the Lender Needs it Official HMRC documents proving your declared income and tax paid for the last 2-3 years. | Minimum Required 2 years |
Document Required Certified Business Accounts | Why the Lender Needs it Formal confirmation of business profits/losses, prepared or signed off by a qualified accountant. | Minimum Required 2 years |
Document Required Business Bank Statements | Why the Lender Needs it To verify operational income flow, look for stability, and check for large, unexplained transactions. | Minimum Required 6 months |
Document Required Personal Bank Statements | Why the Lender Needs it For the affordability check, review regular personal expenditure and outgoings (e.g., debt, subscriptions). | Minimum Required 3-6 months |
Document Required Evidence of Upcoming Contracts | Why the Lender Needs it Required for day-rate contractors to prove income stability and continuity of work. | Minimum Required New/Ongoing Contract |
Document Required Proof of Deposit Source | Why the Lender Needs it Anti-money laundering requirement to show where the deposit funds originated. | Minimum Required Varies |
How to boost your self-employed mortgage application chances
The following steps are critical for increasing the loan amount offered, accessing lower interest rates, and reducing the processing time for your application.
- 1
Minimise Tax Deductions
For the two tax years prior to your application, resist the temptation to write off every possible business expense. Lenders use your net profit; the lower your profit, the less you can borrow.
- 2
Save a Larger Deposit
Aim for a Loan-to-Value (LTV) of 85% or less (15% deposit or more). A larger deposit significantly reduces the lender's risk, often unlocking access to better interest rates and a wider selection of competitive mortgage products.
- 3
Maintain Impeccable Credit
Ensure you are on the Electoral Register and check your credit file for any errors or missed payments. Lenders require a clean repayment history to approve the large risk associated with a self-employed application.
- 4
Instruct a Specialist Broker
The complex calculations for directors (retained profit) and contractors (day-rate) mean many high-street lenders will reject you. A specialist broker knows which UK lenders and building societies will assess your specific income structure most favourably.
Book a FREE(i) consultation with one of our independent brokers.
- Access to the whole market.
- Not tied down to selling any particular lender's products.
- 100% impartial advice.
- No need for face-to-face meeting.
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
