It’s surprising how many self-employed individuals believe that owning a business or working for themselves makes obtaining a mortgage out of reach. The truth is that lenders are well aware of the challenges self-employed applicants face and have straightforward processes in place to assess how much they are prepared to lend.
How Lenders Assess Self-Employed Applicants
Lenders evaluate self-employed individuals differently based on their business structure:
- Sole Traders and Partners:
The key consideration is net profits. This figure reflects the true earnings of the individual after business expenses are deducted.
- Company Directors:
For company directors, lenders typically assess salary and dividends paid from the company.
- Proof of Income:Most lenders require evidence of income for the past two or three tax years. They may either average out the income over this period or use the most recent year for their calculations.
- For applicants with a strong financial profile, some lenders may accept just one year’s set of accounts.
Managing Income from Multiple Sources
Many self-employed individuals, particularly freelancers, have income from varied sources. For example:
- Freelance Musicians:
Income may come from self-employed gigs, while some teaching work may fall under PAYE and is taxed at source.
These income streams appear differently on documents like the SA302 tax return. However, with clear and accurate justification, all sources of income can be considered and contribute to your annual total.
How We Can Help
Our team of professional financial advisors can help self-employed individuals:
- Navigate lender requirements.
- Organise and present financial documents to maximise borrowing potential.
- Identify the best mortgage products suited to your unique financial situation.
We also provide assistance for first-time home buyers and offer a range of other mortgage-related services. Explore our website to learn more about how we can support your journey.
Get in Touch Today
If you’re self-employed and looking for expert advice on obtaining a mortgage, contact us today. We’ll provide professional guidance to help you achieve your financial goals.