Complete Guide to Self Employed Mortgages

Securing a mortgage can be a daunting task, especially if you’re self-employed. Traditional lenders often require a stable income history and a regular paycheck, making it challenging for self-employed individuals to qualify for a mortgage. 

In this comprehensive guide, we’ll delve into the world of self-employed mortgages. We’ll cover everything from what self-employed mortgages are to how to improve your chances of approval. Sett Mortgages, your trusted mortgage broker, is here to simplify the process and provide expert insights.

What are self-employed mortgages?

Self-employed mortgages are special mortgages designed for people who work for themselves or run their own businesses. They’re a big help for those who face some extra challenges when trying to buy a home.

Now, here’s the interesting part: when most people apply for a regular mortgage, the bank looks at their payslips to decide if they can handle the payments. But if you’re self-employed, it’s a bit different. Instead of those standard documents, you have to show the bank other proof that you can afford the mortgage.

Who qualifies for self-employed mortgages?

When it comes to figuring out who can qualify for self-employed mortgages, these special home loans are quite inclusive. They’re not just for one specific group; they actually cover a wide range of people. Here’s who can benefit from self-employed mortgages:

  • Sole traders: These are people who are in business all on their own. They don’t have partners or shareholders; it’s just them running the show.
  • Limited company directors: Now, this category includes those who own limited companies. These business owners often pay themselves through a mix of dividends and salaries.
  • Business partners: Last but not least, we have business partners. These are people who’ve teamed up with others to run a business together. They share the profits, but they also share any losses that might come along the way.

So, whether you’re a one-person show, a company director, or part of a business duo, self-employed mortgages can be an option for you. It’s a way for all kinds of self-employed individuals to realize their dreams of owning a home.

Why self-employed mortgages can be challenging

Securing a self-employed mortgage is often a tougher journey compared to those with conventional employment. This heightened difficulty arises from several key challenges that self-employed individuals encounter. 

Firstly, self-employed mortgage applicants often face more scrutiny and challenges than their traditionally employed counterparts. The primary reason behind this added scrutiny is the nature of their income, which can fluctuate significantly from one month to the next. These fluctuations can make it challenging for lenders to gauge their financial stability accurately.

It’s not just the variability of income that poses a challenge. The very documentation required to prove this income is different from what conventional employees provide. This divergence in documentation can create confusion and additional hurdles in the application process. To complicate matters further, not all lenders are well-versed in handling self-employed applications. This limited expertise among some lenders can result in lengthy approval processes and potential difficulties in securing the mortgage you need.

How long do you need to be self-employed to get a mortgage?

Lenders typically prefer self-employed applicants with a minimum of two to three years of self-employment history. 

This period demonstrates stability and the ability to maintain a consistent income. However, some lenders may consider applicants with as little as one year of self-employment, so it’s essential to research your options.

What you need to provide for a self-employer mortgage

When applying for a self-employed mortgage, you’ll need to provide various documents to prove your income and financial stability:

  • Tax Returns: Self-assessment tax returns for the past two to three years.
  • Business Accounts: Detailed financial statements, including profit and loss statements and balance sheets.
  • Bank Statements: Personal and business bank statements to verify your cash flow and financial management.
  • Credit Report: A clean credit history is crucial, as lenders use this to assess your creditworthiness.
  • SA302 Forms: These are official documents from HM Revenue & Customs (HMRC) that summarise your income.
  • Proof of Business Ownership: For limited company directors and business partners, you’ll need to provide evidence of your ownership stake.

Types of mortgages for self-employed individuals

Self-employed individuals have several mortgage options to choose from:

  • Fixed-rate mortgages: These offer a stable interest rate for a set period, making it easier to budget.
  • Variable-rate mortgages: Interest rates can fluctuate, but these mortgages often come with lower initial rates.
  • Interest-only mortgages: You pay only the interest for a specified period, reducing monthly payments but requiring a plan to repay the principal.
  • Buy-to-let mortgages: If you plan to invest in rental properties, this type of mortgage is designed for you.

How much can self-employed people borrow?

The amount you can borrow depends on various factors, including your income, credit score, and the lender’s policies. 

Self-employed borrowers typically face more conservative lending limits. Lenders usually calculate affordability based on your net profit or income declared on your tax returns.

How to boost our chances of approval for a self-employed mortgage

Securing a self-employed mortgage can be challenging, but there are steps you can take to improve your chances of approval:

  1. Maintain good credit

A strong credit history is essential for any mortgage application. Pay your bills on time, reduce outstanding debt, and resolve any credit issues before applying.

  1. Build a larger deposit

Saving for a larger deposit can increase your chances of approval and may secure you a better interest rate. Lenders often require a minimum deposit of 5-20% of the property’s value.

  1. Organize your finances

Keep your business and personal finances separate. Lenders prefer applicants who have well-organized financial records, including business accounts and tax returns.

  1. Minimize tax write-offs

While it’s common for self-employed individuals to claim tax deductions, reducing your taxable income can also reduce your mortgage eligibility. Consider the trade-off between minimizing taxes and securing a larger mortgage.

  1. Work with a mortgage broker

One of the most effective ways to navigate the complexities of self-employed mortgages is to work with a mortgage broker. Mortgage brokers, especially those experienced with self-employed clients like Sett Mortgages, can connect you with lenders who understand your unique financial situation and have flexible lending criteria.

Final thoughts

At Sett Mortgages, we specialize in helping self-employed individuals secure the right mortgage for their needs. Our expert mortgage advisors have in-depth knowledge of the self-employed mortgage market and can guide you through the application process, ensuring you have the best chance of approval.

We have:

  • Access to multiple lenders: We have access to a wide network of lenders, including those who specialize in self-employed mortgages, increasing your options.
  • Tailored advice: Our advisors work closely with you to understand your unique financial situation and help you choose the most suitable mortgage product.
  • Streamlined application process: We take the hassle out of mortgage applications by handling paperwork, liaising with lenders, and ensuring your application is complete and accurate.
  • Negotiation skills: We negotiate on your behalf to secure competitive interest rates and favorable mortgage terms.
  • Ongoing support: Sett Mortgages doesn’t stop at securing your mortgage. We provide ongoing support throughout your homeownership journey, answering questions and helping you manage your mortgage effectively.

Securing a self-employed mortgage may seem challenging, but with the right knowledge and support, it’s entirely achievable. 

Remember that every self-employed individual’s financial situation is unique, so it’s essential to consult with experts like Sett Mortgages to navigate the process successfully. Whether you’re a sole trader, limited company director, or business partner, there are mortgage options available to help you achieve your homeownership goals. Don’t let your self-employment status hold you back—take the first step towards owning your dream home today.

If you’re ready to explore self-employed mortgage options or have questions about the process, reach out to Sett Mortgages, your trusted partner in the world of self-employed mortgages. We’re here to guide you every step of the way.

(Remember your home or property may be repossessed if you do not keep up repayments on your mortgage.)


  • Elliott Benson

    Meet Elliott, a seasoned mortgage broker with over nine years of experience in property, and the founder of Sett Mortgages. With a background as a sales negotiator and mortgage services manager, he is a trusted professional with extensive knowledge in all things mortgages. Elliott's empathetic approach and clear communication style make him an approachable expert, decoding the complexities of mortgages for clients from diverse backgrounds. He stays up-to-date with the latest trends and regulations, offering cutting-edge solutions tailored to clients' needs. Committed to their financial well-being, he guides them through the mortgage process, ensuring countless successful and satisfied clients. Elliott's passion extends beyond his practice; he's a prolific writer, sharing his knowledge and insights in industry publications and blogs. His mission is to empower others with the information they need to make sound financial decisions.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.