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How much can a self-employed worker borrow as a mortgage?

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Jan 8, 2023

Emma Lunn

Fact Checked By:
Emma Lunn - Finance Editor

I’m self-employed – how much can I borrow for a mortgage?

In theory, self-employed people have the same mortgage options as everyone else – there is no category of mortgages specifically for the self-employed.

But, in reality, getting a mortgage when you’re self-employed is not always straightforward.  The main issue for self-employed borrowers is proving their income without payslips from an employer.

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How much can a self-employed mortgage applicant borrow?

You can typically borrow 4.5 times your annual income if you are a self-employed borrower.

This is the maximum amount most mortgage lenders will allow you to borrow if you are self-employed.

However, some lenders will accept up to 5x your income, and a few specialist lenders will even offer 6x income if you are a high earner.

To get an idea of what this might look like, check out an online mortgage affordability calculator for a self-employed mortgage estimate.

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What information will I need to provide?

Lenders will want to see proof of your income if you are self-employed.

Most lenders will want to see two or three years’ worth of accounts, as well as tax statements from HMRC.

They will also look at your outgoings to assess mortgage affordability.

Our expert mortgage brokers can discuss self-employment mortgages in more detail with you.

Sole trader mortgage affordability

If you’re a sole trader you’ll normally need a proven track record of trading, bank statements and business accounts.

Some lenders require three years of trading history and bank statements to approve a mortgage application. However, some lenders will consider applicants who have only been trading one or two years.

It is not necessary to hire an accountant. However, you will need your self-assessment tax year overview and SA302 documents. These documents outline your total annual turnover, expenses, and net income.

Mortgage affordability for company directors

Limited company directors’ mortgages can be slightly different because they are usually registered as PAYE workers of the business.

The business then pays the tax-free allowance to the individual as a salary plus dividends from profits.

While most lenders won’t consider salary plus dividends alone, many will consider applicants’ shares of net profits if the money is still in the business.

These could include:

  • Salary
  • Dividend
  • Part of net profit (retained profits)
  • Contribution to pension
  • Car allowance

Some company directors might have a personal pension that the company contributed before taxes. This could be used as a salary too.

For this reason, some mortgage lenders will consider a pension as an income source and include it in the calculation to establish the borrower’s income.

This is helpful for borrowers who are getting a mortgage which is the largest possible based upon their self-employed income.

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Is it possible to use contractor income to get a mortgage?

It can be challenging to get a mortgage as a self-employed contractor.

This is partly because lenders have different definitions of contractors, which can impact the mortgage amount a contractor is eligible for.

Contractors are typically employed on short-term or fixed-term contracts, or are self-employed and work through one company.

Every lender will have a different policy about how they assess applications from contractors.

This will depend on the length of your contract, your industry experience, whether you have had your contracts renewed and any work you have booked for the future.

Contractors can apply to specialist lenders for self-employed mortgages. A chat with one of our mortgage broker advisors, who are experts at getting mortgages for contractors, may be worthwhile.

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Talk to Loan Corp about the affordability of a self-employed mortgage

It is essential to seek advice from a mortgage broker with experience in the market. This can make a huge difference in whether your application for a mortgage is accepted or rejected.

We are available to help you with free advice for self employed mortgages. You can then relax and let us find the right broker for you. There is no charge and no obligation to improve your credit rating.

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