Self-employed mortgages

One of the misconceptions about the mortgage market is that it is now very difficult for self-employed people to borrow in order to buy a home. It’s certainly true that one type of mortgage used by the self employed in the past is no longer available – but for many self-employed people, their chances of being able to borrow are still just as good as anyone else’s.

In any case, the products in question – known as self-certification mortgages – have been outlawed because lenders and borrowers alike were abusing them. The loans, which enable people to borrow without having to prove their income, were originally aimed at a tiny minority of self-employed people with special circumstances, but ended up being sold much more widely.

Options for self-employed mortgage borrowers

In theory, self-employed borrowers have access to exactly the same range of mortgage products as everyone else. You can see the best mortgage deals currently on the market in our mortgage rates table. The key is that you will have to be able to prove you have the income necessary to make the repayments on the loan for which you are applying.

Typically, that will require you to have at least two years’ worth of company accounts – or tax returns – to show to lenders (though a few may request three years’ worth). You may also have to provide evidence of work you have already lined up for the future, in order to show that your current levels of income can be maintained.

However, even if you don’t have two years’ worth of records, you may still be able to get a mortgage.
Self-employed workers who have a regular track record of contract work may be able to use this to their advantage. Also, if you already have a home loan, but wish to remortgage – to move home or simply to get a better deal – your existing lender may be more sympathetic, especially if you have a good history of making repayments on time. Alternatively, if you have large amounts of savings, some lenders may be prepared to be more flexible.

Which mortgage will i get?

There are a handful of specialist lenders who offer products designed specifically with the self-employed in mind. But mainstream mortgage lenders routinely lend to the self-employed too and you may not need to use a specialist.

You should have full access to the choice between fixed and variable rate mortgages including tracker mortgages, so there’s no reason to worry about this. But some lenders do make having a larger deposit a condition of lending to self-employed borrowers. If one lender’s request is overly onerous, consider looking elsewhere. And always shop around for the best rate, since some lenders feel more comfortable about self-employed borrowers than others.

Help for the self-employed borrower

There are certain traps that self-employed mortgage borrowers need to watch. For example, your accountant will see it as part of his job to minimise your tax bill using legitimate methods to reduce your taxable income – but this could count against you when applying for a mortgage. Also, many self-employed people also earn money through the PAYE system, which can make their business income seem lower.

For these reasons – and given the other challenges they may face when applying for a mortgage – it’s really useful for self-employed workers to take impartial and expert advice on getting the best possible mortgage deal.

You can speak to a Which? mortgage adviser by calling 0117 981 7787 – or request a call back. Our advisers look at every mortgage from every available member, and because they’re paid a salary –not a sales commission – you can have confidence you’ll receive truly impartial advice.