More people today work for themselves. Thanks to the internet and cloud computing, more people can work remotely and independently. For those who want the freedom to take on as much work as they want, when they want, working for yourself can be the best option.

There are also many industries where self-employed is the standard. In media, for example, everyone on the project is hired as an independent contractor. There are very few salaried workers on each project.

Being self-employed comes with many benefits. If you get consistent work, then you may find it even pays more than you would as a salaried worker.

The issue with being self-employed isn’t the money you can make or the freedom you have to make it; it’s proving your financial stability. There may be periods where you don’t get any work at all and others where work just seems to flood in.

This instability is why self-employed professionals may find it harder to get a mortgage. The key word here is harder, not impossible. If you want to learn about getting a mortgage when self-employed, then you’re in the right place.

This guide covers what you’ll need to improve your application and how to get a mortgage when you’re self-employed. Ready to get started? Let’s dive in:

Can Self-Employed Get a Mortgage?

First things first, can a self-employed professional get a mortgage? Yes. If you are self-employed, you can absolutely get a mortgage and get on the property ladder. The checks you’ll need to go through will be more extensive, but so long as you’ve been working as a freelancer or contractor for a few years and have a good financial history (good credit score, low debt-to-income ratio, consistent income range), you should be able to find a few mortgage offers.

Getting a Mortgage: Self-Employed Documents List

Knowing how to get a mortgage while self-employed is crucial since there are extra documents you’ll need to provide and conditions you need to prove to potential lenders. In fact, organising your financial records and getting everything in order in advance is going to help more than any other step. That’s why, to get a mortgage, you’ll need to collect these documents:

1. Your tax returns: You’ll need to provide all of your tax returns since you’ve started freelancing. Do note that lenders will want at least two or (ideally) three years’ worth of records so that they can see your income averages. If you just started working as a self-employed professional, you’ll have a much harder time getting a mortgage.
2. Your accounts: You will also have to provide your accounts. Now, this is best handled by a certified accountant. If you are only just starting to prep yourself to get a self-employed mortgage, consider hiring a certified accountant to handle and manage your books (or at least just file your taxes once per year) starting now. Otherwise, you’ll need to organise everything yourself and provide as much evidence as you can.
3. Bank statements: You’ll also need to provide six months’ worth of bank statements for both your personal and business accounts. This is to show cash flow. Ideally, you’ll want your accounts to show significantly more coming in than going out (unless it’s going “out” to a savings account).
4. Your credit score and history: You’ll want to take out credit cards and start linking accounts ASAP to build up your credit score and history. Make all payments on time, register yourself on the electoral roll, and make sure you are using between 1 and 50% of your credit limit to keep utilisation low.

Different deposit requirements for the self-employed

While 5% deposit mortgages do exist, you’ll have a harder time getting one if you are self-employed. That’s why you’ll want to prepare by saving up a larger deposit between 10 to 20%. This will reduce the loan-to-value amount.

Self-employed mortgages also may come with higher interest rates. To lower them, you’ll need to put forward a higher deposit.

How to Get a Mortgage When Self Employed

Getting a mortgage when you’re self-employed is all about preparing. If you can, first start by preparing your career information. Having multiple clients is more stable than having just one, for example. Similarly, having a large deposit and all your accounts made up and certified by an accountant can help prep your documents for a mortgage application.

You essentially need to prove stability as much as you can. Once you’ve got all your documents and the deposit together, you can then use these steps to get your deposit:

1. Go to a mortgage broker and see which offers are available to you.
2. Get a mortgage or agreement in principle, which lets you know your true budget range.
3. House hunt
4. Put in an offer for a home you want (if this takes more than a year, you’ll likely need to get another mortgage in agreement as they do expire).
5. Double-check your mortgage offers through the broker
6. Make your official mortgage application
7. Do surveys on the property while your lender conducts valuations and financial checks
8. If all is well, you’ll get your official mortgage offer
9. Sign the agreement and have the funds transferred (this is known as conveyancing).
10. You now own a home!

 

If your application is rejected, see why it was rejected and start making improvements. You can apply again if your situation changes within six months.

How Many Years Self-Employed for Mortgage UK

Mortgages in the UK tend to last between 25 and 30 years. You should also be able to get a mortgage for this period. What may change is how long you can get a fixed rate mortgage term, though this depends on lender to lender and also your financial situation.