As a young self-employed professional under 35, securing a mortgage might seem daunting. However, with the right approach and preparation, it’s entirely achievable. Here’s your guide to navigating the mortgage landscape as a self-employed individual in the UK.
Understanding Self-Employed Mortgages
In some ways the mortgage application is the same for both employed and self employed as the mortgage is based on your taxable income. However due to the variable nature of self-employment and the fact that you would generally only declare your income to HMRC once a year, lenders view self-employed applicants differently in terms of paperwork. They’ll typically examine your income history over the past 1-3 years to assess your borrowing capacity. For more details click here.
Additionally there are many types of self-employment. You may be an entrepreneur setting up your own business or you may be a consultant or freelancer. Many Accountants, solicitors, and other professionals also benefit from contracts which include a director, partner or LLP member employment type which can be consider self-employment.
As a young professional, you may benefit from specialist lenders who consider your future earning potential and understand the complex income structure that may come as standard in your new chosen profession.
Proving Your Income
To strengthen your application, and depending on your income type and the lender, you may need to provide:
- SA302 tax calculations and tax year overviews
- Business accounts
- Bank statements
- Contracts or invoices
- Supporting letter from your company to confirm your partner contract and income if appropriate
These documents help lenders understand your financial situation and income stability.
Maximising Your Borrowing Potential
Depending on the lenders criteria and the figures they use to confirm your income, the amount you can borrow can vary widely.
I was able to support a newly promoted equity partner, in his first year at partner level to secure a mortgage with the right lender. Other advisers had told him despite his employment history at the firm, his recent promotion to partner level and being in his first year at that level, meant he would have to wait until after he had submitted his first years accounts. With the right lender we were able to secure him the right mortgage at a competitive rate within 2 weeks.
Improving Your Chances of Approval
- Maintain detailed financial records and ensure you keep copies of contracts
- Work with an accountant and keep records of your tax calculations and overviews.
- Build a strong credit score
- Save for a larger deposit if possible
- Work with a specialist mortgage broker
Professional Mortgages
If you’re in a recognised profession such as accounting, law, medicine, or architecture, you may qualify for a professional mortgage. These often come with more favourable terms, including higher income multiples and lower income requirements.
Government Schemes
Don’t forget to explore government-backed schemes like shared ownership, which can assist first-time buyers with smaller deposits, and it’s particularly appropriate for those on a career path which will see their income improve in future. The scheme allows you to buy a share of the property to start with and then as your income improves you can refinance to buy more or all of the remaining shares. There are properties all over London on the scheme, in some very exclusive postcodes, and if you thought ‘affordable housing’ would be in any way ‘less’, you should view some of the properties I have seen on the scheme! Check out www.sharetobuy.com for properties available on the scheme.
The Importance of Expert Advice
Navigating self-employed mortgages can be complex. Working with a specialist mortgage advisor who understands the nuances of self-employed applications can be invaluable. They can guide you through the process, help you present your financial situation in the best light, and potentially save you thousands in interest over the mortgage term
At Evergreen Mortgages, we specialise in helping young, self-employed professionals secure their dream homes. We understand the unique challenges you face and can help you find the most suitable mortgage products for your situation. Don’t let your self-employed status hold you back from homeownership. With the right preparation and expert guidance, you can secure a mortgage that fits your needs and helps you step onto the property ladder. Contact us today to explore your options and start your journey to homeownership.
