Self-Employed Mortgage FAQs
Common Questions About Getting a Mortgage When You’re Self-Employed
Being self-employed does not mean you cannot get a mortgage.
The main difference is usually how a lender assesses and verifies your income.
If you're a sole trader, partner, contractor or limited company director, different lenders can look at your earnings in different ways. Your trading history, accounts, tax documents and business performance can all become relevant.
This is why self-employed mortgage applications are often less about finding a special "self-employed mortgage" and more about finding a lender whose criteria and method of assessing income fit your circumstances.
At Cambs Ely Mortgages, we help self-employed clients and company directors understand how lenders may view their income and what information may be required.
Below are answers to some of the most common questions we receive.
Understanding Self-Employed Mortgages
Can I get a mortgage if I'm self-employed?
Yes, subject to affordability and lender criteria.
Self-employed applicants can access mortgages in much the same way as employed applicants, but lenders normally require different evidence to establish income.
The way your income is assessed will depend partly on how your business is structured.
Is it harder to get a mortgage when self-employed?
Not necessarily, but the assessment can be more detailed.
An employed applicant may be able to demonstrate income using payslips and employment information.
For a self-employed applicant, the lender may need to understand business accounts, tax information, trading history and how income is generated.
If the figures are straightforward and meet the lender's criteria, being self-employed does not automatically make the application problematic.
Are there special mortgages for self-employed people?
Generally, you are applying for mainstream or specialist mortgage products rather than a completely separate category of "self-employed mortgage".
The important difference is usually lender criteria.
Some lenders may be better suited to particular self-employed circumstances than others.
Why do lenders treat self-employed income differently?
Self-employed income can fluctuate from one year to another and can be structured in different ways.
A lender needs to establish what level of income it considers sustainable when assessing whether the mortgage is affordable.
Different lenders can reach different conclusions from the same business figures.
How Lenders Assess Self-Employed Income
How is my self-employed income calculated?
That depends on your business structure and the lender.
A sole trader may be assessed differently from a limited company director.
Lenders can also have different policies about which figures they use and how they deal with changes in income between accounting periods.
Do all lenders calculate self-employed income the same way?
No.
This is one of the most important things to understand about self-employed mortgages.
Different lenders can use different income calculations and have different requirements concerning trading history, accounts and recent business performance.
As a result, the amount you can potentially borrow may vary from one lender to another.
What if my income changes every year?
Fluctuating income is common for self-employed people.
A lender may look at income across more than one accounting period and consider whether the business income is increasing, stable or declining.
How this is treated depends on the lender and the circumstances.
What happens if my latest year's income is higher?
An increase in income can be positive, but lenders don't all treat recent increases in the same way.
Some may use an average, while others may have different approaches depending on the figures, business history and supporting evidence.
A significant increase may also lead to questions about whether the higher level of income is sustainable.
What if my latest year's income is lower?
A reduction in income can affect affordability.
The lender may want to understand why income has fallen and whether the reduction is temporary or reflects an ongoing change in the business.
A lender may take a cautious approach where recent income is lower than previous years.
How Long Do I Need to Have Been Self-Employed?
Do I need three years of accounts to get a mortgage?
Not necessarily.
There is no single rule that applies to every mortgage lender.
Many lenders prefer an established trading history, but some may consider applicants with a shorter period of self-employment.
The options available will depend on your circumstances and the lender's criteria.
Can I get a mortgage with two years of accounts?
Potentially, yes.
Two years of trading history may provide access to a range of lenders, subject to the rest of the application meeting their requirements.
The way the lender calculates income can still vary.
Can I get a mortgage with only one year of accounts?
Potentially.
The range of lenders may be more limited, but some lenders may consider applicants with a shorter trading history.
Previous employment, experience in the same industry and the overall strength of the application may also be relevant depending on the lender.
What if I've recently become self-employed?
Recently becoming self-employed doesn't automatically mean you need to wait several years before considering a mortgage.
However, lender choice may be more restricted.
Your previous employment, current business, experience and available financial evidence can all become important.
Sole Trader Mortgages
How do lenders assess a sole trader?
For a sole trader, lenders will generally look at the income generated through the business and evidenced through the appropriate tax and financial documentation.
The precise figure used for mortgage affordability depends on the lender.
What documents might a sole trader need?
Requirements vary, but lenders may request documents such as tax calculations, Tax Year Overviews, business accounts and business bank statements.
They may also request additional information where necessary to understand the business or verify income.
Does business turnover determine how much I can borrow?
Not usually on its own.
Turnover is the money coming into the business before expenses and other deductions.
A lender will normally be more interested in the income figure it considers available to you rather than simply the amount the business invoices or receives.
A business with a high turnover can still have relatively modest profit after expenses.
Limited Company Director Mortgages
Am I considered self-employed if I'm a company director?
For mortgage purposes, many lenders will treat a company director with a significant ownership interest in the business as self-employed.
The precise definition can vary between lenders.
This means that even if you receive a monthly salary through PAYE, the lender may still assess you using its self-employed criteria.
How do lenders assess company director income?
There is no single method used by every lender.
Some lenders may primarily consider salary and dividends.
Others may be able to consider different elements of the company's financial performance where their criteria allow it.
This difference can be particularly important for directors who deliberately retain profit within their company rather than withdrawing everything personally.
What if I take a small salary and leave money in the company?
This is common among some limited company directors.
If a lender only considers the personal income you have drawn from the company, this may not reflect the wider financial performance of the business.
Other lenders may take a different approach, subject to their criteria.
Understanding how your income is structured can therefore be particularly important when researching mortgage options.
Can retained company profit help with mortgage affordability?
Potentially, with lenders whose criteria allow them to consider it.
Not every lender assesses company directors using retained profits or the same business figures.
Where retained profit is relevant, the lender may also consider ownership, business performance and the sustainability of the income.
Does owning a small percentage of a company make me self-employed?
It depends on the lender.
Lenders can have different thresholds for deciding when a company director or shareholder should be treated as self-employed.
Your ownership percentage and how you're paid can therefore affect how an application is assessed.
Contractors & Freelancers
Can contractors get a mortgage?
Yes, subject to lender criteria and affordability.
Contractors can be assessed in different ways depending on how they work and how they're paid.
Some lenders may use accounts or tax information, while others may have specific criteria for certain types of contractors.
Can my contract day rate be used for mortgage affordability?
Potentially.
Some lenders have criteria that allow certain contractors to be assessed using their contract rate rather than solely relying on historic accounts.
The calculation and eligibility requirements vary considerably between lenders.
Does it matter how long is left on my contract?
It can.
A lender may consider the remaining contract period, previous contract history, gaps between contracts and your experience in the industry.
Different lenders have different requirements.
What if I've only recently started contracting?
Some lenders may consider recent contractors, particularly where there is a relevant employment or contracting history.
Others may require a longer track record.
The circumstances need to be considered against individual lender criteria.
CIS Workers
Can I get a mortgage if I work under the Construction Industry Scheme?
Potentially, yes.
Some lenders have specific approaches to applicants working under the Construction Industry Scheme, commonly known as CIS.
Depending on the lender and your circumstances, your income may be assessed differently from a traditional self-employed calculation.
What evidence might a CIS worker need?
The evidence required varies between lenders.
It may include CIS statements or payslips, bank statements, tax information and details about your work history.
The lender's approach will depend on how it categorises your employment and income.
Accounts & Mortgage Documents
What documents do self-employed applicants normally need?
The exact documents depend on your business structure and lender, but commonly requested information can include:
Tax calculations
Tax Year Overviews
Business accounts
Personal bank statements
Business bank statements
Identification and proof of address
Evidence of deposit where applicable
Company directors may also be asked for information relating to the limited company.
Additional documents can be requested depending on the circumstances.
What are SA302s or tax calculations?
A tax calculation shows information relating to the income declared for a particular tax year and the resulting tax calculation.
It can be used by mortgage lenders as part of the evidence of self-employed income.
What is a Tax Year Overview?
A Tax Year Overview provides information relating to your tax position for the relevant tax year.
Lenders may request this alongside tax calculations as part of their income verification.
Why might a lender ask for business bank statements?
Business bank statements can help provide a more current picture of business activity.
They may be requested to support the lender's assessment of whether the business continues to trade at a level consistent with the income being used for the mortgage application.
Will I always need full business accounts?
Not necessarily.
The documents required depend on your business structure, lender and circumstances.
However, having your financial records organised before starting the mortgage process can make it easier to identify suitable lender options.
Your Accountant & Mortgage Application
Will the lender contact my accountant?
Potentially.
Some lenders may request additional information or an accountant's reference where their criteria require it.
This isn't necessary for every mortgage application.
Can my accountant help prepare for my mortgage application?
Yes.
Making sure your accounts and tax information are up to date can be very helpful.
If additional financial information is required, having an accountant who can provide it promptly may also help avoid unnecessary delays.
Should I reduce my income to save tax before applying for a mortgage?
Tax planning and mortgage affordability are separate considerations.
Decisions about how much income to draw from a business can affect the income figures available for mortgage affordability.
Mortgage advice isn't tax advice, so significant decisions about remuneration and taxation should be discussed with an appropriately qualified tax professional or accountant.
If you're planning to apply for a mortgage, it can also be useful to understand how any proposed changes may affect mortgage affordability before they are made.
Deposits & Self-Employed Mortgages
Do self-employed people need a bigger deposit?
Not automatically.
Being self-employed doesn't necessarily mean you must provide a larger deposit than an employed applicant.
The deposit required will depend on the mortgage products available, lender criteria, property and your overall circumstances.
Can I use money from my business for my deposit?
Potentially, but the source of the funds needs to be understood.
Taking money from a limited company can have accounting and tax implications depending on how it is extracted.
The mortgage lender and solicitor may also need evidence of where the deposit originated.
Appropriate accounting or tax advice may therefore be required.
Can I use retained profits as my deposit?
Money held within a company isn't automatically the same as money personally available to you.
If funds are being withdrawn from a business for a property deposit, the method of withdrawal and any tax implications should be discussed with your accountant.
The lender and solicitor may also require evidence of the source of funds.
Credit & Self-Employed Mortgages
Do self-employed applicants need better credit?
Not necessarily.
Self-employed and employed applicants are both subject to lender credit assessment.
However, your credit history forms part of the overall mortgage application alongside your income, deposit and other circumstances.
Can I get a self-employed mortgage with a default or CCJ?
Potentially.
Previous credit problems don't automatically prevent a self-employed person from obtaining a mortgage.
The type, age and amount of the credit issue, whether it has been satisfied and your wider circumstances can all be relevant.
Does business credit affect my personal mortgage?
It can depend on the business structure and circumstances.
Personal guarantees, business borrowing and other financial commitments may become relevant to the lender's assessment.
If there are significant business liabilities, these should be disclosed when discussing your mortgage circumstances.
Affordability for Self-Employed Applicants
Can I borrow the same amount as an employed person?
Potentially.
The important issue is the amount of income the lender is prepared to use and whether the mortgage is affordable under its criteria.
Once acceptable income has been established, self-employed applicants aren't necessarily restricted to lower borrowing simply because they're self-employed.
Why does one lender say I can borrow less than another?
Lenders use different affordability models and can assess self-employed income differently.
One lender may use an average of particular income figures, while another may use a different calculation.
For company directors, differences in the treatment of salary, dividends and company profits can make the variation even more significant.
Can a successful business help me borrow more?
Potentially, but the lender still needs to establish an acceptable personal income figure for affordability.
Strong business performance can be relevant, particularly where the lender's criteria allow it to consider more than just the income you've personally withdrawn.
Applying for a Mortgage
Should I get an Agreement in Principle if I'm self-employed?
An Agreement in Principle can be useful before seriously searching for a property.
However, self-employed applicants should be particularly careful not to assume that an automated affordability result means the lender has fully assessed the business income.
The full application may involve a more detailed review of your financial documents.
Will the lender check my accounts after an Agreement in Principle?
Potentially, yes.
An Agreement in Principle isn't a full mortgage approval.
During the full application, the lender may review the accounts, tax information and other supporting evidence before confirming whether the income meets its requirements.
Can a mortgage be declined because of my accounts?
Potentially.
A lender may decline an application if the income doesn't support the requested borrowing or if the financial information doesn't meet its criteria.
This is why understanding the figures before selecting a lender can be particularly important for self-employed applicants.
Recently Started Businesses
Can I get a mortgage if my business is less than two years old?
Potentially.
Some lenders may consider shorter trading histories, while others may require a more established record.
Your previous employment, experience, business structure and available evidence can all be relevant.
Does previous experience in the same industry help?
It can, depending on the lender.
For someone who has recently become self-employed but has substantial experience in the same occupation or industry, some lenders may take this into consideration.
It doesn't guarantee acceptance, but it can form part of the overall assessment.
Should I wait another year before applying?
Not automatically.
If you assume you cannot obtain a mortgage without checking the available lender criteria, you could potentially wait unnecessarily.
It can be useful to understand your current position first and then decide whether applying now or waiting would be more appropriate.
Remortgaging When Self-Employed
Can I remortgage if I became self-employed after taking my current mortgage?
Potentially.
A new lender will assess your current employment and income position rather than simply relying on the circumstances you had when the original mortgage was arranged.
Your trading history and financial information will therefore become relevant.
Will becoming self-employed affect my existing mortgage?
Changing employment status doesn't normally mean your existing mortgage simply disappears or needs to be replaced.
However, becoming self-employed may affect your options when you later want to remortgage, move home or borrow additional funds.
Can I stay with my existing lender instead?
Potentially.
Your existing lender may offer product transfer options.
Depending on what you're trying to achieve, this can sometimes involve a different process from applying to a new lender.
It can be useful to understand both the existing lender's options and the wider mortgage market before deciding how to proceed.
Company Directors & Business Owners
Should I provide my company accounts even if the lender only asks for my personal income?
The documents required depend on the lender.
It can still be useful for your mortgage adviser to understand the wider financial position of the company when researching options, particularly if your personal drawings don't fully reflect the performance of the business.
Does leaving profit in my company hurt my mortgage application?
It depends on how the lender assesses company director income.
If a lender primarily considers salary and dividends, leaving substantial profit within the company may mean that some of the business's financial strength isn't reflected in the affordability calculation.
Other lenders may have criteria that allow them to assess company directors differently.
Can my business pay my mortgage?
For a standard residential mortgage on your personal home, the mortgage is normally your personal financial commitment.
How you take income from your business to meet personal expenses is a separate accounting and tax consideration.
Can I get a mortgage if I own several businesses?
Potentially.
The lender may need to understand your ownership interests, income and financial commitments across the businesses.
Applications involving multiple companies can require additional information because the income structure may be more complex.
Preparing for a Self-Employed Mortgage
What should I do before applying?
Having organised financial information can make the process considerably easier.
Make sure your tax information and accounts are available and that you understand how your income is structured.
It is also useful to review your credit position, deposit and existing financial commitments before starting the application.
Should I speak to my accountant before applying?
It can be useful, particularly where your income structure or company finances are more complex.
Your accountant can help provide the financial documents required and explain the company's financial position where necessary.
Should I speak to a mortgage adviser before making an offer?
It can be particularly useful for self-employed applicants.
Understanding how different lenders may assess your income before making an offer can provide a more realistic picture of potential borrowing.
It can also identify any documents or issues that may need attention before a full application.
Using a Mortgage Adviser When You're Self-Employed
Why can mortgage advice be useful for self-employed applicants?
The challenge is often not whether a self-employed person can obtain a mortgage, but how their income is interpreted by different lenders.
A lender that works well for one business owner may be unsuitable for another.
Understanding the business structure, income history and lender criteria can therefore make a significant difference when researching mortgage options.
How many lenders does Cambs Ely Mortgages have access to?
Cambs Ely Mortgages has access to more than 200 lenders, including high-street banks, building societies and specialist lenders.
This allows us to consider different approaches to self-employed income rather than relying solely on the criteria of one lender.
Does Cambs Ely Mortgages charge for the initial conversation?
There is no charge for the initial conversation.
This gives us an opportunity to understand how you're self-employed, how your income is structured and what you're trying to achieve before you decide whether to proceed.
What does Cambs Ely Mortgages charge for arranging a mortgage?
A fee may be payable for arranging your mortgage.
Your adviser will confirm the amount before you choose to proceed.
Our mortgage arrangement fee is usually between £295 and £995, with the precise amount depending on your circumstances and the complexity of the work involved.
Have More Questions About Self-Employed Mortgages?
Self-employed mortgage applications can look complicated because there isn't one method used by every lender.
The way you're paid, how long you've been trading, whether you're a sole trader or company director, your latest financial results and how much profit remains within a business can all affect the way lenders assess an application.
Our Self-Employed Mortgage Guide provides a more detailed explanation of mortgages for business owners, company directors and other self-employed applicants.
Our Mortgage & Home Buying Guides and Educational Videos also provide further information about affordability, mortgage applications, credit, deposits and the wider mortgage process.
Thinking About a Mortgage When You're Self-Employed?
You don't need to assume that being self-employed makes getting a mortgage difficult or impossible.
The starting point is understanding how your income is structured and which lender criteria may be relevant to your circumstances.
Cambs Ely Mortgages is based in Cambridgeshire and helps self-employed clients, contractors and company directors in Ely, Cambridge, Cambridgeshire, East Anglia and throughout England through convenient remote appointments.
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Information on this page is for general guidance and does not constitute personalised mortgage, accounting, tax, legal or financial advice. Mortgage availability, affordability and eligibility depend on individual circumstances and lender criteria. Where decisions involve company finances or taxation, appropriate professional accounting or tax advice should be obtained.