Quick Answer
Yes, self-employed borrowers can get a mortgage. Lenders typically assess your trading history, income, tax records, business performance, deposit, credit history and existing commitments.
The key is that lenders use different criteria. One may decline your application while another accepts it, so choosing the right lender before applying can make a significant difference.
Introduction
Self-employment does not stop you getting a mortgage. What catches many borrowers out is that lenders often assess self-employed income very differently from employed income. One lender may be comfortable with a single year’s accounts, while another may want two or three years. Some focus heavily on salary and dividends.
Others look at net profit, retained profits or day-rate contracts. As a result, many self-employed applicants assume they will be declined when, in reality, they may simply be approaching the wrong lender. Understanding how different lenders assess self-employed mortgages can often reveal options that were not obvious at first.
Understanding what lenders actually look at can help you prepare properly, avoid unnecessary rejections and improve your chances of securing the mortgage you want. In this guide, we explain the nine key factors lenders assess and where self-employed borrowers can often strengthen their application before they apply.
What Do Lenders Check When You Apply for a Self-Employed Mortgage?
1. How Long You’ve Been Running Your Business
Lenders want to see that your income is not a one-off good year. The longer you have been self-employed, the more evidence they have that your business can generate reliable income and cope with changing market conditions.
Many lenders prefer at least two years of accounts, but that is not a hard rule across the market. Some lenders are willing to consider applicants with only one year’s trading history, especially if they have previous experience in the same industry, a strong deposit, or a solid track record before becoming self-employed.
If you have only recently become self-employed, you may still have options. Some lenders specialise in applicants seeking a mortgage with one year’s accounts, provided the wider application is strong.
This is why being declined by one lender does not necessarily mean you cannot get a mortgage. Often, it is a case of finding a lender whose criteria match your circumstances.
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2. What Counts as Your Income
One of the biggest misconceptions among self-employed borrowers is that lenders simply look at turnover or the money coming into the business. What matters is the income figure a particular lender chooses to use when assessing affordability.
The calculation can vary depending on how your business is set up. For example:
- Sole traders are often assessed on net profit.
- Limited company directors are commonly assessed on salary and dividends.
- Some lenders will also consider retained profits left in the business.
- Contractors may be assessed using their day rate or contract income.
This can be particularly important for limited company directors, where lenders may use different methods to assess income than they would for sole traders or employees.
Because lenders can calculate income differently, the amount you can borrow can vary significantly from one lender to another. This is often where specialist mortgage advice can make a real difference.
3. Whether Your Earnings Are Heading in the Right Direction
Lenders do not just look at the latest year’s figures in isolation. They want to understand the overall direction of your income and whether the business appears financially sustainable.
Steady growth can strengthen an application because it shows the business is developing and generating increasing income. Equally, a temporary drop in profits is not always a problem if there is a clear reason behind it.
For example, lenders may take a different view if profits fell because you invested in new equipment, hired staff, or took time away from work for personal reasons. The numbers matter, but so does the story behind them. A well-explained change in income can often be easier for a lender to accept than borrowers realise.
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4. Whether Your Tax Records Back Up Your Income
When you apply for a mortgage, a lender will usually want evidence that the income you have declared is supported by your HMRC records. This is where documents such as SA302s and Tax Year Overviews often come into play.
Lenders compare these documents against the income figures shown on your application. If there are discrepancies, missing filings, or recently submitted returns that have not yet been processed by HMRC, it can slow things down or create additional questions.
For self-employed borrowers, keeping tax records accurate and up to date is not just an accounting issue. It can have a direct impact on how smoothly a mortgage application progresses.
5. How Your Business Is Performing Today
A lender is not investing in your business, but they do want reassurance that it remains financially healthy. If your income comes from a business that is struggling, that can affect how comfortable a lender feels about future affordability.
Depending on the lender and the type of business you run, they may look at factors such as:
- Recent turnover trends.
- Profit levels compared with previous years.
- Business bank account activity.
- Available cash reserves.
- Whether the business is still actively trading.
This tends to become more important for company directors and business owners whose personal income is closely linked to the success of the business itself.
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6. How Much of the Purchase Price You Need to Borrow
Your deposit does more than help you get onto the property ladder. It also determines your loan-to-value ratio (LTV), which is the percentage of the property’s value that you need to borrow.
From a lender’s perspective, a larger deposit means less risk. Someone borrowing 75% of a property’s value is generally viewed differently from someone borrowing 95%. As a result, borrowers with bigger deposits often have access to a wider choice of lenders and mortgage deals.
For self-employed applicants, a stronger deposit can sometimes help offset areas that lenders may view more cautiously, such as a shorter trading history or income that varies from year to year. It will not overcome every issue, but it can improve the overall strength of an application.
7. Your Personal Credit History
Being self-employed does not automatically make your credit history more important than it would be for an employed applicant. Lenders still look at your personal credit record when deciding how comfortable they are with the application.
If you have experienced credit issues in the past, specialist bad credit mortgages may still be available depending on the age and severity of the problem.
They may check for things such as:
- Missed or late payments
- Defaults
- County Court Judgments (CCJs)
- High levels of unsecured borrowing
- Recent applications for credit
Taking steps to improve your credit score before applying may also increase the number of lenders willing to consider your application.
A previous credit problem does not necessarily mean you cannot get a mortgage. Different lenders have different approaches to adverse credit, so the same issue can produce very different outcomes depending on where you apply.
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8. Your Existing Monthly Commitments
Your mortgage application is not assessed on your business income alone. Lenders also want to know how much of your income is already committed to other financial obligations.
They can take account of payments for credit cards, personal loans, car finance and other ongoing commitments when working out how much you can comfortably borrow. Regular household costs can also form part of the lender’s affordability assessment.
This matters for self-employed borrowers because a strong business income does not necessarily translate into the borrowing amount you expect. If a significant portion of your income is already going towards existing commitments, the mortgage amount a lender is prepared to offer may be lower.
9. The Type of Self-Employment You Have
There is no single mortgage rule for everyone who works for themselves. How you earn your money can affect which documents a lender wants to see and how it assesses your income.
A sole trader, limited company director and contractor can have very different income structures, even if they earn similar amounts. Lenders may therefore apply different criteria depending on how your business operates.
For example, they may distinguish between:
- Sole traders
- Limited company directors
- Partnership or LLP members
- Contractors working on fixed-term contracts
- Freelancers and consultants
- Locum professionals
This is one of the reasons choosing a lender before understanding its self-employed criteria can backfire. The right lender for a limited company director may not be the right lender for a contractor with a similar income.
What Happens If Your Income Has Recently Fallen?
A weaker year does not automatically mean you cannot get a mortgage. The important question is why your income has fallen and how the lender assesses that change. A temporary drop caused by fewer contracts, taking time away from work, or investing in the business can be very different from a continuing decline in profits.
Lenders may look at your latest figures alongside previous years rather than treating the most recent figure in isolation. However, their approach can differ. Some may place greater weight on the latest year’s income, while others may consider a longer trading history when deciding what income they are prepared to use.
This is one reason why a sole trader mortgage application may be assessed differently from an application submitted by a limited company director or contractor. Understanding which lenders suit your business structure can prevent unnecessary declines and widen your options.
What If One Lender Says No?
A mortgage rejection from one lender does not automatically mean you cannot get a mortgage elsewhere. This is particularly important for self-employed borrowers because lenders can take very different approaches to income, trading history, business structures and credit issues.
For example, one lender may be uncomfortable with a recent drop in profits, while another may consider the wider trading history. One may only use salary and dividends for a limited company director, while another may also consider eligible retained profits. The same application can therefore produce a different result depending on the lender’s criteria.
The mistake is to apply repeatedly without first understanding why the application was declined and which lenders are more likely to accept your circumstances. Multiple applications can create additional credit searches and may make an already difficult situation harder to manage.
This is where a broker can add value. The aim is not simply to find a lender that accepts self-employed applicants. It is to identify lenders whose criteria fit your particular income, business structure and financial circumstances before submitting an application.
- Totally impartial — we work for you, not the lender
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Get in TouchWorried Your Self-Employed Income Will Hold You Back?
Getting a mortgage when you work for yourself is not always about earning enough. The lender you apply to and the way that lender assesses your income can make a real difference.
At Everest Mortgage Services, we look beyond a single set of accounts or one lender’s criteria. We consider how your business is structured, how your income is generated, how long you have been trading and any issues that could affect your application. We then look for mortgage options that fit your circumstances rather than expecting you to fit a standard lending model.
If you are self-employed and unsure how a lender will view your income, getting advice before you apply can help you avoid unsuitable applications and understand what options may be available.
Book your free 15-minute call with Everest Mortgage Services to discuss your circumstances and your mortgage options.
Your home may be repossessed if you do not keep up repayments on your mortgage.
