As a mortgage broker in Guildford that’s carved out a reputation for getting specialist mortgages – or unconventional mortgages, as they’re also known – for clients up and down the UK, we’re no strangers to some of the UK’s most unusual mortgage products.
From adverse credit mortgages to mortgages for teachers (and, more recently, entertainment industry mortgages), we’re proud to say that we’ve worked with them all. However, there’s one particular area that is still on the fringes of being regarded as a hard-to-get mortgage – even when it shouldn’t be, really – and that’s the self-employed mortgage.
According to Statista.com, there were around 4.24 million self-employed people in the UK throughout May – July 2024. That’s a significant proportion (almost 13%) of the 33.23 million-strong UK workforce* as a whole.
So, why are self-employed mortgages harder to get than PAYE mortgages?
What is a self-employed mortgage?
In truth, there really isn’t such thing as a self-employed mortgage. It’s just that lenders are more stringent when it comes to those who don’t have a regular fixed income; the kind that comes with being on a company’s payroll. A lender will define you as self-employed if you are a sole trader or own (typically) 20% or more of a company.
This doesn’t mean that you pay higher rates just because you’re self-employed. However, what it does mean is that there is generally more work involved in the application process.
A general nervousness that lenders experience when it comes to lending to self-employed people means that those applying need to demonstrate more evidence than PAYE applicants that they’re able to honour their mortgage payments.
Everything else – such as credit scoring and the size of your deposit – remains the same.
Why is it harder to get a self-employed mortgage?
Self-employed people tend to have more control over how they pay themselves, a benefit of which means that they can reduce their tax liability. However, declaring a lower income in order to reduce your tax liability – even if your business is cash rich – reduces the overall amount you can borrow.
Sadly, you can’t have both a low tax bill and the ability to borrow huge amounts of money, even if you know that you can draw on that money to meet mortgage repayments if required.
So, how do you overcome it?
What can be done to help self-employed people get mortgages?
The first thing you should do is find a mortgage broker for self-employed people. And by that, we mean a mortgage broker that has proven experience in getting mortgages for the self-employed. Our team of Guildford mortgage brokers have many years of experience in this area. In fact, mortgages for self-employed people accounts for a significant amount of our business.
If you use Complete Mortgages, we’ll walk you through the entire process, step by step, ensuring that we have everything we need to put forward a strong case on your behalf to our network of lenders.
Using a mortgage broker if you’re self-employed is probably the best thing you could do. However, there are other things that would help your case, too. Being able to demonstrate two years of strong – and consistent, if possible – accounts is essential. The less erratic your accounts are, the more favourable a lender will be. Likewise, it’s worth checking your credit report to see if there are any surprises in there, some of which you may be able to address prior to submitting a mortgage application.
If you’re self-employed and are worried about getting a mortgage, then don’t be. Simply call our team of Surrey mortgage advisers, who’ll be able to help you get everything you need together.
If you’re self-employed and need help with getting a mortgage, contact the Complete Mortgages team on 01483 238280 or e-mail info@complete-mortgages.co.uk.
Source: UK labour market statistics
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