Empowering self-employed business owners: Making mortgages work for you
Starting out on your own as a business owner is exhilarating, but securing a mortgage as a self-employed individual may feel a bit more daunting.
Understanding mortgage options for self-employed individuals
Self-employed and freelance workers have access to various mortgage options, the same as traditional salaried employees. The key difference lies in how income is assessed. Whether you’re a salaried employee or self-employed common mortgage types include:
- Fixed rate mortgages – offer predictable payments with interest rates locked in for a set period
- Variable rate mortgages – interest rates fluctuate based on market conditions, sometimes leading to lower payments
- Specialist lender mortgages – provided by lenders who cater to entrepreneurs and business owners and understand the nuances of self-employed income.
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Challenges faced by self-employed people in securing mortgages
Unlike salaried employees, self-employed individuals sometimes face additional hurdles when applying for a mortgage, such as:
- Irregular income streams – lenders may see fluctuating income as a risk
- Stringent income verification requirements – more detailed information and paperwork may be required by lenders as evidence of income to assess a mortgage application and affordability
- Higher deposit expectations – some lenders may request a larger deposit to mitigate perceived risk, although typically you’ll probably need 5% to 10% of the property’s value
- Limited high street lender options – many traditional banks may have stricter criteria that doesn’t always suit entrepreneurs. A fee free mortgage broker like Save On Mortgages will be able to help you find a lender that caters for self-employed individuals and secure a competitive deal. Being self-employed or a freelancer doesn’t mean you can’t get a mortgage.
Benefits of getting a mortgage as a self-employed individual
Despite the challenges, there are advantages to securing a mortgage as a self-employed individual:
- Greater financial control – owning a home provides stability, unlike renting
- Wealth building –investing in property helps you build equity over time
- Tailored mortgage options – specialist lenders cater to self-employed and freelancing professionals with flexible terms.
Steps to prepare for applying for a mortgage
Preparation is key to securing a mortgage with favourable terms. Follow these steps:
- Improve credit score – ensure your credit score is strong by paying off debts and managing credit responsibly
- Organise financial records – maintain accurate and up-to-date accounts to demonstrate financial stability
- Save for a larger deposit – a higher deposit can improve mortgage approval chances and help secure a more competitive rate
- Reduce business expenses – while tax deductions are beneficial, high expenses can lower your taxable income, making mortgage approval harder
- Consult a (FEE FREE) mortgage adviser – expert advice can help you find the right mortgage product at no additional cost to you.
Documents required for self-employed mortgage applications
Lenders typically request the following documents from self-employed applicants:
- Two or more years of tax returns (SA302s)
- Certified accounts or profit & loss statements
- Bank statements (personal & business)
- Proof of identity & proof of address
- Business contracts (if applicable).
Having these ready can streamline the mortgage application process.
Finding the right lender for self-employed mortgages
Not all lenders have the same criteria for self-employed applicants. Consider:
- Specialist lenders – understand the complexities of self-employed income
- Mortgage brokers – can match you with lenders offering the best terms.
- Fee free mortgage advisors – like Save On Mortgages, offering expert advice at no cost.
Common misconceptions about mortgages for self-employed Individuals
Some myths surrounding self-employed mortgages include:
- "You need perfect credit to qualify" – while a good credit score helps, there are options for those with less-than-perfect credit
- "You need three years of accounts" – Some lenders accept just one year of trading history
- "High deposits are always required" – some lenders offer mortgages with deposits as low as 5-10%
- "Mortgage applications are too difficult" – with expert advice, the process can be straightforward.
Conclusion
Being self-employed shouldn’t be a barrier to homeownership. With the right approach, preparation, and expert guidance, securing a mortgage can be a smooth process. At Save On Mortgages, we specialise in helping self-employed and freelance professionals navigate the mortgage market—without charging a fee. Our friendly and expert advisers are here to ensure you find the best mortgage solution tailored to your needs.
Ready to take the next step? Contact us today and let’s make your homeownership dream a reality!
