Self-Employed Mortgage

Is it harder to get a mortgage if you’re self-employed?

No. It can be hard to get a mortgage for lots of reasons, and for different people; being self-employed is not necessarily one of them. All sorts of things can come into this, as we’ll discuss as we go through these questions.

The mortgage you can get will depend on your income, how long you’ve been trading and how you’re set up – whether you’re a sole trader or limited company. There are plenty of lenders to go to for a mortgage if you’re self-employed, and some are set up better than others.

What type of mortgage can I get if I’m self-employed? Can I get a 95% mortgage if I’m self-employed?

You can have any type of mortgage, like anyone else. You can definitely find a 95% Loan to Value mortgage, although not every single lender will go to 95% if you’re self-employed.

You need a good credit score for a 95% mortgage, but so does everyone. You’re probably going to need two years’ income history, but at the time of recording today in December 2025, I can think of one 95% lender that will accept one year’s trading.

How many years do you have to be self-employed to get a mortgage? Can I get a mortgage with only one year of self-employment?

The more history you have, the better, but only one or two lenders need as long as three years. These are smaller lenders we wouldn’t necessarily go to that often.

Most lenders want two years’ history – but that might not be a full 24 months. You might start your company in August and have figures up to the following April – that can be year one. It’s not a full year, but you’ll have figures and a net profit at the end. Then you would have a full 12 months from April to April the following year.

We can use two years’ tax returns and income numbers, even if it’s not a full two-year period. There are also lenders we can go to with one year’s self-employment.

If you’ve gone from employed to self-employed doing the same job, it’s easier. You might be an employed electrician and then become a self-employed electrician. Once you’ve got one year’s figures, some lenders can look at that.

My most recent year’s earnings were less than my average. Will this affect my mortgage application?

A few lenders only use the latest year, anyway. Most others will average the two years’ income if it’s going up, but the latest if it’s going down. There’s no getting around that, really.

It might be something you can explain – such as buying a big piece of machinery or as a limited company director you put a lot of money in your pension in the latest year. Some lenders might take a view on that, and a few lenders will add back in your pension contributions, because it’s still your income.

We might get your accountant to explain that the latest year is just a blip, and next year will be back to normal. There is potentially a way around that.

How much can I borrow as a self-employed person? How many times my salary can I borrow for a mortgage if I’m self-employed?

It depends on your income and your outgoings. If you’ve got loans, credit cards, car payments, childcare etc., that’s going to affect your affordability – regardless of who you are and what you do.

If you haven’t got many other commitments, you can usually get about 4.5 times your annual income. Some lenders will do a bit more than that, potentially, if you earn more than £60,000 or £70,000. Certain lenders are more generous than others.

We’re going to either average the last two years or take the latest if it’s lower, and you can borrow around 4.5 times that. We can also add in your partner’s income, potentially.

What mortgage deposit do I need if I’m self-employed?

As we said at the start, 95% mortgages are available, so you can get away with a 5% deposit. That’s all you need, technically, but the more deposit you’ve got, the better.

If you’ve got 10% or 15%, the rate’s going to come down. With 95% mortgages, the rate is still fairly high. For every extra 5% deposit you put in, the rate will drop down a little more. Beyond 10%, the difference is very slight.

What are self-certification mortgages and do they still exist?

No, they don’t – for very good reason. A self-certification mortgage was where an applicant would state what they earned and confirm they could afford to manage the repayments – without providing any proof.

I arranged one or two of these back before the credit crunch in 2008. There weren’t many lenders for it, but a few would take a client at their word. Inevitably, those people then couldn’t afford the mortgage and ended up in a sticky situation. So self-certification is not around any more, which is probably for the best.

How will you be assessed as a self-employed mortgage applicant?

We’re going to look at your income. If you’re a sole trader, we’re going to look at your tax calculation, which gives your net profit for the tax year, April to April. The money coming in is your turnover, your expenses then go out and you end up with a profit at the end. That’s what lenders are going to use to assess your affordability.

If you’re a director of a limited company, similar things apply with salary and dividends or salary and profit. There’s more information on mortgages for limited company directors on our website.

We look at your income based on that net profit figure for the tax year, and then assess your outgoings: loans, credit cards, cars, maintenance, childcare. Lenders don’t factor in your food budget or energy bills, because they use Office of National Statistic data for that. It’s just credit commitments.

Lenders all have their own affordability calculators. You put in your income and outgoings and it comes up with a figure – and some lenders are more generous than others.

Will IR35 affect my mortgage application?

Unless you’re a contractor you won’t need to worry about IR35. Again, there’s a lot of contractor information on the website.

IR35 needn’t affect your mortgage. If you’re a contractor inside of IR35, we can still use your income and it doesn’t make a huge difference to your application. If that does affect you, have a look at those contractor pages for more information.

How will a lender calculate my self-employed mortgage earnings?

It’s based on net profit – how much you’ve got left over after you’ve paid all your costs. That’s what we use as your income – plus any extra income you get on the side.

You might have a rental property or receive benefits or tax credits. That can go in with your income plus your partner’s income, if there’s more than one of you.

What documents do I need to apply for a self-employed mortgage? How do I prove my income?

If you’re self-employed, we ask for your SA302 or tax calculation – these are the same thing.
You get this when you submit your tax return and you can find it on your HMRC gateway.

We’ll normally ask you for those over the past two years. They need to be within 18 months old, generally, so once we get to October we’ll need the latest year’s – even though you don’t have to submit that until January, we will need it for a mortgage.

Alongside the SA302, we need your tax year overview, which is a summary of your tax account. It states how much tax you owed that year and how much you paid. You should have a zero balance left at the end.

Those two documents together are what we need. We also need a few months’ bank statements and ID as with any mortgage application.

Key Takeaways:

• Most lenders require two years of income history, though some will accept one year’s trading, especially if you’ve moved from employed to self-employed in the same field.
• A lender will calculate your earnings based on your net profit. They typically average the last two years’ income if it’s increasing, but will take the latest (lower) figure if your income has dropped.
• You can generally borrow around 4.5 times your annual income (net profit), which will be assessed alongside your outgoings such as loans, credit cards, car payments, and childcare.
• A 95% Loan to Value mortgage is available, meaning you can apply with a 5% deposit. However, increasing your deposit will result in a lower interest rate.
• You will need your SA302/tax calculation and your tax year overview for the past two years to prove your income.
  
  

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

For specialist tax advice, please refer to an accountant or tax specialist.

The information contained within this article was correct at the time of publication but is subject to change.