SELF EMPLOYED MORTGAGES

Self-employed mortgages tailored for you

A self-employed mortgage, also known as a self-certification mortgage or non-standard income mortgage, is a home loan designed for individuals who are self-employed and have income that might not fit the standard criteria used by traditional mortgage lenders. These borrowers often have fluctuating or less conventional income streams, making it challenging to meet the stringent income verification requirements of traditional mortgages.

Who could benefit from self-employed mortgages?

Self-employed individuals, including freelancers, entrepreneurs, business owners, and contractors, often require this type of mortgage.

These borrowers typically lack regular pay stubs which are the standard proof of income for traditional mortgages.

Instead, they may rely on business profits, dividends, rental income, or a combination of various revenue sources.

Did you know…

• You may not need to present three years of accounts – some lenders, in the right circumstances will only require a year’s worth of accounts
• While some lenders will only consider salary and dividends, others will use salary and net profit, and others may even allow self-employed clients to use salary and operating profit.
• As a contractor that pays tax you may not have to be treated as a self-employed person. Some lenders can use income pre-tax (multiples of day rate, or annual contract), which can be very favourable.
• Many lenders will consider not only the self-employed income but also rental income, interest accrued, part-time roles and foreign currency income as well.

Do self-certification mortgages still exist in the UK, and, if not, what replaced them?

Self-certification mortgages no longer exist. They were phased out following the 2014 mortgage market review due to poor practices from before the 2008 financial crisis, when individuals could declare their income without proof.

Today, all income must be verified using documents such as tax year overviews, tax calculations, limited company accounts, or partnership accounts. This change protects both lenders and borrowers, preventing people from borrowing more than they can afford and safeguarding them against future interest rate rises.

How many years of accounts do self-employed applicants typically need to provide?

Lenders typically ask for two years of history to assess how your business has performed. This helps account for fluctuations, such as a loss in the first year followed by a profitable second year.

However, some lenders will consider one year of accounts in isolation, especially if you have moved from employment to a similar contracting role. Eligibility and options for better rates improve when you have two years of evidence, but having only one year does not automatically rule you out.