Getting a mortgage when you are self employed can feel daunting. Many people are told it is difficult or even impossible, but that simply is not true. We help self employed clients secure mortgages every day. The key is understanding how lenders assess your income and having the right guidance for your circumstances.
In our Self Employed Mortgages video on Home Made by The Lathams, we explain how self employed mortgages work, what lenders are really looking for, and how you can put yourself in the strongest possible position.
For a summary, read on…
Common misconceptions about self employed mortgages
One of the biggest myths we hear is that being self employed automatically makes it harder to get a mortgage. While the process can be more complex than for employed applicants, lenders are very open to self employed borrowers.
What matters most is evidence, consistency and sustainability of income. With the right preparation, being self employed does not prevent you from buying a home.
How lenders assess self employed income
Lenders want confidence in your financial track record. They are looking to understand how your business performs over time and whether your income is reliable.
This usually means reviewing at least two years of accounts or tax calculations, although criteria varies between lenders. They assess income differently depending on your structure, such as:
- sole traders
- limited company directors
- shareholders
- income from salary and dividends
Each setup is treated differently, and affordability can vary significantly depending on how your income is drawn.
Profitability and sustainability matter
Lenders are not just looking at turnover. They want to see sustainable income and profitability. Businesses are often run in a tax efficient way, which makes sense from an accounting perspective, but this can reduce your income on paper and affect how much you can borrow.
This is where advice is crucial. Understanding how your accounts present your income to a lender can make a real difference to your mortgage options.
Why lenders need confidence in your accounts
Sadly, businesses can and do fail. Around 30% do not make it beyond the first two years. Revenues can fluctuate, especially in the early stages, and lenders need reassurance that your income is stable enough to support a long term mortgage commitment.
This is why track record matters. The more evidence you can provide of consistent income, the stronger your application becomes.
Limited company vs sole trader mortgages
Limited company directors, sole traders and self employed professionals are all assessed differently. Some lenders will look at salary and dividends, while others may consider retained profits.
This variation means that choosing the right lender is essential. A mortgage broker can match your circumstances with lenders whose criteria work in your favour.
Why early advice makes a difference
Simply put, you need the right guidance for your circumstances. Speaking to a broker early allows us to explain what lenders will look for and how you can position yourself well ahead of an application.
Even if you are not planning to buy yet, advice now can help you maximise affordability later. This is especially important if buying a home is a medium term goal.
How we can help
We guide self employed clients through the mortgage process from start to finish. We explain the documentation needed, how income is assessed, and what options are available to you.
If you are self employed and considering buying a home, or simply want to understand your position better, we are always happy to help guide you through what to expect.
📺 Watch the full video here to learn more:
https://youtu.be/AEvdv_9pyhc
