BELFAST CITY CENTRE: 028 9013 7392 | EAST BELFAST OFFICE: 028 9560 9410 | ORMEAU ROAD, BELFAST: 028 9521 9349 | LISBURN RD BELFAST: 028 9521 9351 | DROMORE: 028 9210 6060 | LISBURN: 028 9279 4300 | ARMAGH: 028 3743 0770 | LURGAN: 028 3898 4004 | DUNGANNON: 028 8747 0270 | COOKSTOWN: 028 8673 1055  | COALISLAND: 075 6180 7334

Contact Your Local Branch
BELFAST, CITY CENTRE: 028 9013 7392
BELFAST, EAST OFFICE: 028 9560 9410
BELFAST, ORMEAU ROAD: 028 9521 9349
BELFAST, LISBURN ROAD: 028 9521 9351
DROMORE: 028 9210 6060
LISBURN: 028 9279 4300
ARMAGH: 028 3743 0770
LURGAN: 028 3898 4004
COOKSTOWN: 028 8673 1055
DUNGANNON: 028 8747 0270
COALISLAND: 075 6180 7334

Navigate the Mortgage Process as a Self-Employed Applicant

by | Dec 6, 2023 | Uncategorized | 0 comments

As experts in mortgages in Lurgan, our mortgage clinic is here to guide you through the process of securing a mortgage, especially if you’re self-employed. Whether you’re running your own business or working as a freelancer, obtaining a mortgage can present unique challenges.

The nature of self-employed income, often characterised by its unpredictability and perceived lack of security, requires lenders to seek extra assurance of your ability to consistently meet monthly repayments over the long term. Therefore, as a self-employed individual, it’s crucial to meticulously prepare for your mortgage application to increase the likelihood of approval. 

Remember, each rejected application could negatively impact your credit score, making subsequent applications more challenging. It’s important to make your first application as strong as possible.

The Self-Employed Mortgage: Debunking Common Myths

Contrary to the widespread notion of a ‘self-employed mortgage’, there isn’t a specific mortgage deal exclusively for self-employed individuals. Essentially, if you’re self-employed, you have access to the same variety of mortgage options as someone with a salaried position. 

However, your personal circumstances, which may include the variable nature of self-employed income, could result in a more restricted selection of mortgage deals. Additionally, you might encounter more rigorous checks and verifications by lenders due to the unique financial profiles often associated with self-employment.

Tips on mortgages for the self employed

Here are some valuable tips for self-employed individuals applying for a mortgage, aimed at enhancing your chances of securing a favourable deal:

  1. Consider Your Spouse as the Primary Applicant: If your spouse is salaried and not self-employed, it could be beneficial for them to be the primary name on the mortgage application. Lenders often view a salaried income as more stable and predictable, which might increase the likelihood of approval. Even if your spouse earns slightly less than you, the consistency of their income can be a significant advantage. Discuss this strategy with your mortgage broker to see if it’s a viable option for you.
  1. Provide a Minimum of Two Years of Accounts: Most lenders will require at least two years of recent accounts, with the latest being no older than 18 months. These accounts should accurately reflect your financial situation and income.
  1. Engage a Professional Accountant: An accountant can not only ensure that your accounts meet the necessary standards but also help you understand them thoroughly. Being able to confidently discuss your financial details can be advantageous if lenders have questions about your accounts.
  1. Prepare Your SA302 Form and Tax Returns: Some lenders may request an SA302 form from HMRC, which confirms the income you’ve reported, alongside or instead of your accounts. Since these forms can take a few weeks to arrive, request them well in advance. Additionally, be prepared to present recent tax returns as part of your application.

By following these guidelines, you can strengthen your mortgage application and improve your chances of getting a good deal as a self-employed individual.

Increase Your Income if You Can

Boosting your income can be a strategic move when applying for a mortgage, particularly for self-employed individuals and business owners. Typically, it’s advisable in business to retain as much profit as possible. However, when trying to secure a mortgage, you might consider an exception to this rule.

  • Increase Your Dividend Payments: By paying yourself a higher dividend from your business profits, you can enhance your mortgage application. This approach demonstrates a higher personal income, which is often viewed favourably by mortgage lenders.
  • Strengthen Your Savings for a Larger Deposit: The increased income from higher dividends can also boost your savings, enabling you to afford a larger deposit. A substantial deposit often improves your mortgage terms and can lead to more favourable interest rates.
  • Adjust Your Income Post Purchase: After securing your home and mortgage, you have the flexibility to readjust your income to a more sustainable level, as long as you can comfortably manage the mortgage repayments and other financial commitments.

It’s essential to balance this strategy with the long-term financial health of your business and personal finances. Consulting with a financial advisor or mortgage broker can provide personalised guidance tailored to your specific circumstances.

Postpone Major Business Changes

When you’re self-employed and applying for a mortgage, it’s important to consider the stability of your business. Lenders often look for consistency, so making major changes to your business structure, like shifting from a sole trader or partnership to a limited company, can be seen as a red flag. 

If such a change is essential and can’t be delayed, it’s a good idea to give the new business structure some time to settle. This allows you to gather financial records that demonstrate the stability and profitability of your business under this new arrangement. Additionally, clear and transparent communication with your lender about your business structure is crucial. 

They need to fully understand how you generate income and the way it’s received to accurately assess the risk and viability of your mortgage application. In essence, showcasing stability in your business and being upfront about your financial situation can significantly enhance your prospects of mortgage approval.

Use a Specialist Mortgage Broker for Mortgages in Lurgan

Utilising a specialist mortgage broker can be a significant advantage when looking for Mortgages in Lurgan. Opting for a broker such as ourselves here at The Mortgage Clinic with extensive experience in securing mortgages for self-employed individuals can make a notable difference. With our extensive knowledge and experience we are adept at foreseeing potential issues and can identify the most suitable lenders from the entire market for your specific situation. 

This approach minimises the risk of having your application declined. While one declined application might not significantly impact your credit score, a series of rejections could be detrimental. 

Consulting with an expert adviser not only enhances your chances of approval on the first attempt but also streamlines the process, making it more efficient and tailored to your unique financial circumstances.

Seeking Mortgages in Lurgan? Contact our team today to begin your consultation. 

Helmut Elstner

Managing Director – Independent Mortgage Broker and Insurance Advisor

Helmut started working in financial services in early 2012 and founded The Mortgage Clinic in Belfast in early 2015. He specialises in all types of mortgages from First Time Buyer, Co-ownership, Self Build, Home Movers, Remortgages, Debt consolidation, to Buy to Let.

Three Best Rated Winner 2021
Winner Mortgage Broker of the year 2020
Top Rated Advisor 2021 on Vouchedfor