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Your Questions Answered: Getting a mortgage as a self-employed person is hard isn't it?

Getting a mortgage as a self-employed person is hard, isn’t it?

There are approximately 4.3 million people in the UK who are self-employed (as of July 2021*), with there having been a significant increase over the last 24 months. Whether you have a ‘side hustle’ or are self-employed as your main source of income, you may have questions around whether it is possible for you to get a mortgage.

If you’re self-employed, you will, in theory, have access to the same range of mortgages as someone who is employed. You will also need to pass the lender’s affordability calculator, in the same way that any other borrower would need to do.

However, as there isn’t an employer to provide payslips, self-employed people need to provide evidence of their income in a more robust manner.

To give a little background to why this is, prior to 2009 there were types of mortgage called ‘self-certification’ mortgages. These were designed specifically for self-employed people and relied on the individual declaring their income without any evidence of that declaration. Unfortunately, this type of mortgage was misused, leading to the Financial Conduct Authority banning them in the UK, as they posed too great a risk to borrowers. This is why lenders will generally require two years accounts from borrowers, rather than the usual 3 month’s payslips required for employed borrowers. This allows lenders to assess if the borrower has the ‘track record’ of a business that will continue to provide income to meet the mortgage repayment needs.

By nature, lenders are a little risk averse. They want to reduce the risk of the mortgage repayments not being met and then potentially having to repossess the property.

Although it may feel frustrating that there extra ‘hoops’ to go through when applying for a mortgage when self-employed, it’s important to remember that these are put in place to protect you as the borrower as well as the lender.

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