Documents Needed for Self Employed
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How does a self-employed mortgage differ to other mortgages?
The actual mortgage products that are available to self-employed applicants are the same as those available to employed people. The only difference lies in how you are assessed to meet the criteria of Mortgage Lenders.
Given the increase in self-employed business owners and freelance workers in recent years, some independent Mortgage Lenders now specialise in mortgages for self-employed applicants.
Self-employed income, whilst more accepted by lenders in current times, is still viewed as a less stable source of income than PAYE income from a traditional employed job. This means that in order to determine your ability to afford your mortgage repayments in the long term, lenders will need to be satisfied that your income is stable.
Each lender will assess self-employed income differently. Some can use the most recent year’s figures, whilst other lenders may use an average figure calculated from the past two to three years of your self-employed income. This amount will then be used as your income figure and multiplied by between three and five times, depending on your creditworthiness and other commitments, to determine your loan.
What specific documents do you need?
The exact documentation needed to provide as proof of income depends on the type of self-employed work you carry out.
Sole traders (or freelance workers)
SA302 Tax Computations for the past two to three years, where available, will be needed for the lenders to establish your income for affordability. However, we may still be able to help even if you have only been self-employed for one year.
Limited Company Director
Tax Computations (SA302) and accompanying Tax Overviews are typically required to evidence income for a self-employed mortgage application. Tax Computations show the breakdown of company director salary plus dividends, whilst tax overviews show tax liabilities for the year. Lenders can request your full finalised accounts, certified by a qualified accountant. Some mortgage lenders may opt for an accountant’s reference in favour of Tax Computations.
As a general rule, you must own more than 20% of the company to be classed as self-employed for mortgage purposes. In this case, your personal Tax Computations will be used to evidence your ‘net profit’ figure for mortgage affordability.
How do you improve your chances of being accepted by a lender?
Self-employed mortgage applicants in particular will benefit from preparing in advance of applying for a mortgage. Here are some recommended preparations you can make:
Prepare your finances
Accounts will need to be signed off by a certified accountant for use in a mortgage application, so ensure this is complete. Limited Company business owners may be able to use retained profit towards mortgage affordability, this can be very beneficial if you have a very profitable business.
All mortgage applicants will undergo a credit check so it’s important to improve your credit rating where possible. Check you’re on the electoral roll, check that all your utility bill accounts hold accurate details, and reduce any debts and credit card usage as this will all help.
Offering more than the minimum deposit requirement can help to improve your chances of acceptance as it reduces risk to the lender. You may also access better rates.
How can Fifty Nine Financial Help?
Here at Fifty Nine Financial, we specialise in finding competitive mortgage deals for self-employed applicants. We have access to a wide range of independent lenders who are more likely to accept applications from self-employed applicants in a variety of circumstances, which can save you the stress of receiving rejected applications from traditional lenders. Get in touch and see if we can help you today.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.