Sole trader mortgages

Being your own boss has plenty of rewards; flexibility, freedom, picking your ideal projects and not having to answer to anyone. But, when it comes to getting a mortgage, it can sometimes feel like you’re at a disadvantage. We understand why, as there are a few more hoops you’ll have to jump through if you want to be approved for a sole trader mortgage. Luckily, with the right preparation and guidance, getting a self-employed mortgage as a sole trader is possible.

At Everest Mortgages, we specialise in helping self-employed applicants, including sole traders, to navigate the mortgage application process confidently and successfully. You’ll be on your way to property ownership in no time.

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The challenges of getting a mortgage as a sole trader

Getting a mortgage as a sole trader isn’t necessarily harder, but it is slightly different. As you don’t have a fixed monthly salary or an employer to confirm your ongoing employment and earnings, lenders look a little bit deeper into your finances. They need to assess your income stability and ability to repay before you’re approved for a sole trader mortgage, but that’s something our mortgage broker experts can help you with.

You probably have irregular or variable income

Many sole traders experience income that fluctuates from month to month. You might have a lot of work in one minute, and a lot less the next. It’s all part of being self-employed. But, mortgage lenders like consistency, so they’ll usually look at your average income over the last few years to get an idea of what your finances look like long-term.

Limited trading history can complicate things

If you’ve only recently started your business, you won’t have years’ of accounts to prove your income. This can make getting a mortgage slightly tricker, but it’s definitely not a deal breaker. Some specialist lenders are willing to consider applicants with just a year of trading history behind them, or even less if there’s other evidence of financial stability.

Your earnings might come from multiple income streams

As a sole trader, your income might come from a mix of clients, contracts or services, and your projects probably change from one month to the next. Lenders need to see proof of all these sources, and they will calculate your affordability based on the average. Applying for a sole trader mortgage can take more paperwork than a typical employee application.

Lenders ask for complex financial documentation

Unlike employed borrowers who just provide payslips, sole traders need to show detailed proof of income through tax returns, accounts and even accountant statements. The paperwork can be time-consuming and complicated, but it’s also your chance to showcase your success and financial responsibility.

Lenders will look at your credit history

Just like any other mortgage applicant, your credit record matters. Late payments, defaults or a large number of debts can limit your mortgage options, so it’s a good idea to check your credit report in advance. This will give you time to clear up any issues before you apply.

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Proving your income as a sole trader searching for a mortgage

When you’re applying for a sole trader mortgage, you need to show lenders that your income is genuine, consistent and sustainable. As a sole trader, this usually means providing:

SA302 tax calculations from HMRC for the last 2 or 3 tax years, though some lenders will accept less if you haven’t been trading for long.
Full tax year overviews and SA302s from HMRC.
Business bank statements, usually from the last 3 to 6 months.
An accountant’s certificate or reference to back up your earnings claims.
Evidence of upcoming contracts or invoices, if you have ongoing or future work that supports your income.

Popular types of mortgages for sole traders

You might work for yourself, but that doesn’t mean you miss out on having a wide range of mortgages to choose from. As is the case for employed applicants, there are a lot of self-employed mortgages for sole traders.

Fixed-rate mortgages

These enable you to lock in your interest rate for a set period, giving you predictable monthly payments. This can make it easier to balance payments with a fluctuating sole trader income.

Variable mortgages and tracker mortgages

With variable rate mortgages and tracker mortgages, your rate moves with the Bank of England base rate. This can work in your favour if rates fall, as it will reduce your monthly mortgage repayments. However, if rates rise, the opposite happens.

Low deposit mortgages

If you have a good credit score and strong affordability, some lenders will consider deposits as low as 5%. These can make it easier to buy, as there’s no need to save a deposit of between 10% and 20% before you start looking for your dream home.

No deposit mortgages

If you’re struggling to save a deposit, you might be interested in a no deposit mortgage, which enables you to buy a property without putting down a lump sum payment.

Buy-to-let mortgages

If you’re a sole trader and you’re looking to invest in property, your trading income can be used to support a buy-to-let mortgage.

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Sole trader mortgages: Improve your chances of approval

As a sole trader, there are a handful of things you can do to improve your chances of being approved for a mortgage.

Keep your accounts up to date

Lenders want to know you’re taking things seriously. After all, lending to you is a risk, and they want to make sure they’re making the right decision. Having your latest tax returns and accounts ready makes the process faster and smoother.

Save for a bigger deposit

Depending on your finances, you might be able to save for a bigger deposit. A larger deposit usually means you have access to more lenders and competitive rates, as you’re less of a risk for the lender.

Pay off some debts

Reducing your credit card balances and paying off chunks of loans can improve your affordability calculation. With fewer debts to keep on top of, lenders will see that you have more money available for monthly mortgage payments.

Plan ahead

There’s a fair amount of work that goes into sole trader mortgages. Though we take care of the heavy lifting, planning ahead can help. If you know you’ll be applying for a mortgage soon, start thinking about presenting your income in a way lenders understand.

Work with a mortgage broker

A mortgage expert broker can match you with lenders who specialise in self-employed applicants and sole trader mortgages, saving you time and helping you get the best deal available.

At Everest Mortgages, we know the challenges sole traders face when trying to prove income and navigate mortgage criteria. But, we’re on hand to help you find lenders who understand the flexible income and changing profits of a sole trader. We’ll match you with lenders that cater specifically to sole trader borrowers, guiding you through the mortgage application process from start to finish, saving you time, stress and money.

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