Mortgages when you work for yourself
Working for yourself does not make a mortgage hard, but it does make lender choice matter far more. We will introduce you to an adviser at The Finance Seer who understands the differences.
Your Local Broker is an introducer and does not give advice. Your enquiry is passed to The Finance Seer Ltd, who are authorised and regulated by the Financial Conduct Authority.
Your home may be repossessed if you do not keep up repayments on your mortgage.
What lenders count as self-employed
Lenders generally treat you as self-employed if you hold a meaningful stake in the business you work for, even where you pay yourself through payroll like any other employee. The threshold varies between lenders, which occasionally produces the odd result of being employed to one and self-employed to another.
That classification matters because it determines which set of rules gets applied to your income. It is worth establishing where you sit before an application rather than discovering it partway through.
How each kind of income is assessed
A sole trader is normally assessed on net profit as declared to HMRC, typically averaged over a period or taken as the most recent year. Company directors are usually assessed on salary plus dividends, though some lenders will instead consider salary plus retained profit, which can produce a very different figure.
Contractors are often assessed on the day rate annualised, which frequently produces a higher figure than the accounts alone would suggest. Each of these routes suits different people, and the gap between them can be substantial for identical real-world earnings.
Why how you file affects what you can borrow
Accountants generally aim to reduce taxable profit, which is sensible for the tax bill and unhelpful for a mortgage application, because lenders lend against declared income. The two objectives genuinely pull in opposite directions.
If a purchase is on the horizon, it is worth discussing that with your accountant before finalising the year rather than afterwards. Once the return is filed, the figure it shows is the figure lenders work from.
How long you need to have been trading
Many lenders want to see a couple of years of accounts, but that is a convention rather than a rule that binds everyone. Some will consider a single year, particularly where you are working in a field you were previously employed in.
Newer businesses are not automatically excluded, but the range of lenders narrows, and knowing which ones are realistic prevents wasted applications and unnecessary credit searches.
What an adviser will want to know
- Two to three years of accounts, or your SA302 and tax year overviews from HMRC
- Business bank statements as well as personal ones, usually three months of each
- If you are a director, details of salary and dividends taken
- If you contract, a copy of your current contract and day rate
- Photo ID, proof of address and details of your deposit
What happens next
- 1
You tell us what you need
One short form. Name, number, postcode and a line about your situation.
- 2
We pass your details on
We send your enquiry to The Finance Seer, who are authorised and regulated by the Financial Conduct Authority.
- 3
An adviser calls you
Usually within one working day. They will ask questions and explain your options.
- 4
You decide what to do next
Any advice comes from The Finance Seer, not from us. There is no obligation to go ahead.
Common questions
- How many years of accounts do I need?
- Many lenders look for two or more, but some will consider one year, particularly where you previously worked in the same field. An adviser at The Finance Seer will know which lenders are realistic for you.
- I am a director — will they use my salary or the company profit?
- It depends entirely on the lender. Some use salary plus dividends, others will consider salary plus retained profit, which can change what you can borrow considerably.
- Does working through my own company make this harder?
- Not necessarily, but it makes lender choice more important, because different lenders read the same accounts in quite different ways. That is where speaking to an adviser first pays off.