It’s a common worry: “Will I even qualify for a mortgage?” The good news is that being self employed doesn’t mean you’ll struggle to get approved. It just means lenders will need a bit more proof of your income and financial stability. One of the first questions they ask is how long you’ve been working for yourself. Most lenders in the UK like to see two years of accounts, but there are exceptions. Let’s break down what you need to know, from how many years of self-employment are required to the documents you’ll need to get started.
How do you get a self employed mortgage?
Getting a mortgage when you’re self employed is possible, though the process can involve a bit more paperwork. Lenders usually look at your tax returns and business accounts instead of payslips to check if your income is steady.
So, how many years of self-employment do UK mortgage lenders usually expect? In most cases, it’s two years of full accounts. Some may accept one year, but only if your income is strong and your work history is consistent. But there is more to it. Let’s find out!
When are you considered self employed?
You are considered self employed if you run your own business, work as a freelancer, or work for yourself. This includes being a sole trader, part of a partnership, or a director of your own limited company. As a self employed person, lenders will want to know your financial situation to see if you can afford to pay back the mortgage. This means you will need to show proof of income and financial history.
Can you get a mortgage with less than two years of accounts?
Most lenders want to see at least two years of accounts, but some might accept less if you show them other strong evidence of your ability to pay the mortgage. For example, if you have a great credit score, a solid track record in your industry, or contracts that prove you’ll have a steady income, it may be easier to get approved. If you’re new to self-employment, working with a mortgage broker can help you find lenders who are more flexible with shorter self-employment histories. You may be able to get a mortgage even if you’ve been trading for just a year.
Why do lenders need salary history?
Lenders want to be sure you can reliably pay back your mortgage. If you have a regular job, your income stays the same each month. But as a self employed person, your income can change from month to month, making it harder for lenders to assess how risky it is to lend to you. Because of this, lenders usually ask for at least two years of income history to get a better idea of your financial stability.
Do self employed people have to pay higher mortgage rates?
It depends. Being self employed doesn’t automatically mean you’ll get worse deals. But since some lenders see self employed income as less predictable, they might offer higher rates or smaller loan amounts.
However, many specialist lenders now understand how self employed finances work. They look beyond just pay slips. If you’re prepared with proper paperwork, you might still access the best mortgage loans for self employed individuals, just like anyone else.
To avoid high costs, compare lenders and speak to a broker who understands mortgage rules for self employed applicants. Rules can vary depending on how you earn and how long you’ve been working for yourself.
What documents do lenders need from self employed applicants?
When you apply for a mortgage, lenders will ask for documents to prove your income and show you can afford the loan. Typically, you’ll need to provide:
- Two years of tax returns: This shows how much you’ve earned in the last two years.
- Financial statements or accounts: Lenders will want to see your business’s financial health over the last two years.
- Bank statements: Lenders might ask for recent bank statements (3-6 months) to check if your income is steady.
- Additional proof: Some lenders may ask for extra documents like contracts or rental income details.
Make sure your documents are original, complete and up to date to make the application process smoother.
How will a lender calculate my self employed mortgage earnings?
Lenders work differently when assessing income for self employed applicants. They can’t rely on payslips, so they’ll look at your tax returns and business accounts instead. The goal is to check whether your income is stable and enough to afford the monthly payments.
Many lenders take an average of your income over the last two or three years. If your income has gone up recently, they might focus more on your latest year. But if there’s been a drop, they’ll likely base their offer on the lower figure.
The more consistent your earnings, the stronger your case. Lenders want to see that your business can support the loan over time.
Also, make sure your income records match what you declare on your tax returns. This helps avoid delays and builds trust. Some lenders have stricter checks as part of the new mortgage rules for the self employed, so accuracy matters. Since income and deposit size can affect what you’re offered, it’s helpful to understand how lenders assess risk through factors like interest rates if you’re self employed.
How to improve your mortgage approval chances
If you’re self employed, planning ahead can make a big difference. Following these simple steps can improve your chances of approval and give you access to better mortgage options.
Gather your SA302 forms
Lenders often ask for SA302 forms or tax summaries. They are the key to meeting the new mortgage rules for self employed individuals. Details such as deposit size and credit score also affect what you’re offered. These factors are part of how income and risk are reviewed during the process of getting a mortgage when self employed.
Get an accountant
An accountant can help you prepare your business accounts in a way that lenders understand. Many lenders prefer accounts signed off by a certified accountant, as it proves you are eligible for the best mortgage loans for self employed individuals.
Save the biggest deposit possible
By saving more upfront, you can lower your loan-to-value ratio, which many lenders use to decide how much to lend. This gives you more control and confidence in your mortgage search.
Boost your credit score
Your credit score shows how well you manage your money. Pay bills on time, keep debts low, and check your credit file regularly. These small actions can improve your chances of getting one of the best mortgage loans for self employed borrowers.
How to find the best mortgage deals for the self employed
To find the best deal, you need to compare different self employed mortgage lenders. Here are some tips to help:
- Compare interest rates, fees, and loan terms to find the best deal.
- Work with a mortgage broker who can help you find the right mortgage and help you navigate the process.
- Make sure your tax returns, bank statements, and other paperwork are ready and accurate.
- The larger your deposit, the better your mortgage deal will likely be. Aim for at least a 20% deposit to secure the best rates.
Final thoughts
Getting a mortgage when you’re self employed takes preparation, but it’s very possible. Keep your financial records organised, work with an accountant, and understand what lenders need. With steady income, a good credit score, and the right documents, you can boost your chances and move closer to owning your own home.