Thinking about getting a mortgage while being self-employed? You’re not alone, and it’s definitely possible. The trick is planning ahead and knowing what lenders want to see. Here are the two big things to focus on:

1. Work with a broker who understands self-employed mortgages (not all do).
2. Get your accounts sorted and ready to go before you apply.

That’s it. The rest is about preparation and finding the right lender for your situation.

Why self-employed mortgages feel scary (but don’t have to be)

A lot of people come to us feeling nervous, usually because they’ve heard horror stories from friends or colleagues. The good news? It doesn’t need to be stressful. With the right paperwork and the right lender, the process can actually be smooth. Different banks look at self-employed income in different ways, which is why having an experienced broker makes such a big difference. Speak to an advisor now.

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Sole Trader vs Limited Company: What lenders look at

If you’re self-employed, you’ll usually fall into one of two categories:

• Sole Trader/Partnership
• Limited Company Director

Sole Traders & partnerships

Most lenders will want at least two years’ worth of tax returns, though some may consider just one year if you know which banks to go to. Generally, they’ll accept accounts or returns up to 18 months old.

Top tip: If your most recent year was stronger, don’t wait until January to file your return. You can do it as soon as the tax year ends and strengthen your mortgage application.

Banks usually look at your net profit (the figure on your tax return). Some average the last two years, while others may use just the latest year if your income has gone up and looks sustainable. You’ll need your SA302 and tax overview documents to prove it. 

Limited company directors

Here’s where things get a bit more varied. A common myth is that lenders only care about your salary plus dividends. Not true! Some banks will base lending on your share of company profits plus salary, which means you don’t need to take huge dividends (and pay unnecessary tax) just to “look better” on paper.

Most banks will use net profit after corporation tax, while a few use pre-tax profit. Again, some will average two years, while others accept the latest year if your income is rising steadily.

What you’ll need: Signed company accounts, SA302s, and tax overviews. Once your year-end finishes, get your crunch client manager on it early — don’t leave it until the last minute.

Common questions we hear

My income is higher this year, can the bank use it?

Only if the accounting period is finished and the accounts are signed off. 

Can I use projections to boost my mortgage application?

Sadly not. Projections only help if your most recent year is better than the one before and the accounts are already finalised.

I increased my director’s salary, will payslips work?

Not if you own more than 25% of the company. In that case, lenders ignore payslips and only look at accounts or tax returns.

Final tip

Don’t stress about what you’ve heard, every situation is different, and the “rules” aren’t as rigid as people think. The key is getting your paperwork ready early and speaking to a broker who knows the self-employed market inside out. 

Speak to one of our Crunch mortgage brokers first, to guide you through the process: 01273 715885  or Book an appointment

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Article by Rob Starr MBE, CEO of Crunch Mortgages