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Self-Employed Mortgages in the UK: Everything You Need to Know

If you’re self-employed and looking to buy a property, you may be wondering if getting a mortgage is possible. Self-employed mortgages in the UK can be more challenging to obtain than traditional mortgages, but it’s not impossible. In this article, we’ll cover everything you need to know about self-employed mortgages in the UK, including the requirements, documents needed, and tips for increasing your chances of getting approved.

Requirements for Self-Employed Mortgages

The requirements for self-employed mortgages in the UK are generally the same as for traditional mortgages, with a few additional requirements. Here are the key requirements you need to meet to qualify for a self-employed mortgage:

Minimum Income: You will need to show proof of your income, which must meet the minimum income requirement set by the lender. The minimum income requirement varies by lender, but it’s typically higher than for traditional mortgages.

Minimum Trading History: Lenders will want to see a minimum of two to three years of trading history to verify your income and assess the stability of your business.

Good Credit Score: A good credit score is essential when applying for any mortgage, and this is no different for self-employed mortgages. Lenders will review your credit score to determine your creditworthiness and assess the risk of lending to you.

Adequate Deposit: You will need to have a sufficient deposit to put towards the property purchase. The minimum deposit required varies by lender, but it’s typically around 10-20% of the property value.

Documents Needed for Self-Employed Mortgages

To apply for a self-employed mortgage in the UK, you will need to provide several documents to verify your income and business. Here are the key documents you will need to provide:

SA302 Tax Calculation: This is a document issued by HM Revenue and Customs that shows your income, tax paid, and any tax due. You will need to provide SA302 tax calculations for the previous two to three years.

Tax Year Overviews: These are documents that show your tax payments and any outstanding tax owed for each tax year. You will need to provide Tax Year Overviews for the previous two to three years.

Business Accounts: You will need to provide business accounts for the previous two to three years. These accounts should be prepared by a certified accountant and show your business income, expenses, and profits.

Bank Statements: You will need to provide your personal and business bank statements for the previous three to six months.

Tips for Increasing Your Chances of Getting Approved

If you’re self-employed and looking to get a mortgage in the UK, here are some tips to help increase your chances of getting approved:

Improve Your Credit Score: A good credit score is essential when applying for any mortgage, and this is no different for self-employed mortgages. Make sure to check your credit report and address any issues that may negatively impact your credit score.

Save for a Larger Deposit: Saving for a larger deposit can help you secure a self-employed mortgage, as it reduces the risk to the lender.

Consider a Guarantor Mortgage: A guarantor mortgage involves having someone with a good credit score and income act as a guarantor for the mortgage. This can help you secure a mortgage if you’re struggling to meet the requirements on your own.

Use a Specialist Lender: Specialist lenders are more likely to consider self-employed individuals for mortgages, as they have more experience dealing with non-traditional income streams.

Seek Professional Advice: If you’re struggling to secure a self-employed mortgage, seek professional advice from a mortgage broker or financial advisor. They can help you understand your options and guide you through the application process.