Mortgages for the self-employed
BY READERS DIGEST
1st Jan 2015 Property
If you are self-employed one of the biggest challenges when looking for a mortgage can be making sure you have the right proof of income. Whether you are freelance, a sole trader or director, those that are self-employed need to be able to prove their income and have the right paperwork available.
What proofs will be required?
How your business is set up will influence what documents lenders will need.
- Sole trader – Sole traders will need to provide accounts signed by an accountant, or SA302 tax returns. Both will need to be less than 18 months old.
- Partnership –As above accounts or SA302 tax returns will be required, or a certificate from an accountant stating share of net profit.
- Limited company – Lenders will typically take salary and dividends as income. If you own more than 20% of the business lenders will normally treat you as self-employed and require accounts or tax returns to prove income. If you own less than 20% then they may treat you as employed.
Following the Mortgage Market Review in April 2014 all lenders require that income stated on an application can be proven and must be checked, meaning self-certification mortgages no longer exist.
What can I do?
Firstly start by getting together at least two years of business accounts, whilst there are some mortgages available to those with 1 year accounts although you will have less choice and may need a larger deposit.
Accounts will need to be less than 18 months old and signed by an accountant, you may also need to provide tax returns (SA302’s) from HMRC and most lender will need originals so it’s worth ordering them in advance.
It’s also possible you’ll be asked for business and personal bank statements so getting together 6 months of each is a sensible move.
