Self Employed Mortgages
If you're a company director with more than 25% share of the company, or a sole trader, or partnership then you are classified as self employed and will require a self employed mortgage.
Being self employed still means that you have access to the exact same lenders that employed people have. The only difference is in how you prove your income.
Where normally for employed applicants, lenders would want to see payslips and bank statements in the case of self employed applicants, lenders want to see trading accounts and bank statements.
If you have an accountant...
If you have an accountant then you will need to submit trading accounts or the lender may contact your accountant for an accountants reference or certificate confirming your business and income details.
If you don't have an accountant...
If you don't have an accountant then lenders will want to see your tax assessments to confirm your business and income details.
Lending options if net profits are low...
Lenders use your net profit as your income and base their calculations on how much to lend you on your net profit alone.
This causes a problem because very few self employed people declare their true income in order to minimise tax. They use tax minimisation strategies which result in a net profit that doesn't reflect their true income.
If this is the case then you need a self certified mortgage or a no income proof mortgage. Click here to go to our no income proof mortgage guide for further details.
Lending options if net profits are high...
If your net profits reflect your earnings accurately then you can access the exact same lenders as normal employed people just submitting your tax assessments instead of payslips as mentioned above.
Other than this difference in documentation for proving income everything else remains the same as for employed applicants.
Lending wise you can get 100% lending if you don't have a deposit or borrow up to 95% of the property value if you have a deposit.
The difference between getting 100% mortgages and mortgages with deposit paid is in the mortgage interest rate.
100% mortgages have a higher rate of interest than say 95% mortgages which in turn have a higher rate of interest than 90% mortgages and so on.
On a 100% mortgage you will be able to borrow up to 5 times your income so say your net profit is £30,000 then you'll be able to get a mortgage for £150,000.
If you have 5% deposit available then you can borrow up to 6 times your income which would be £150,000 and you simply put your 5% deposit on top to find out the property value you'd be able to buy (in this case 5% of £150,000 is £7,500 so you add this onto the £150,000 to give you a property purchase value of £157,500.
To find a suitable self employed mortgage click here.
If you want some personal advice click here.