Getting a Mortgage When You're Self-Employed

Getting a mortgage when you're self-employed can feel like a much bigger task than it is for someone who works a regular job. Many people assume that earning enough money is all that matters, but the reality is a little more complex and often requires more preparation and understanding of the process.

When you work for yourself, proving that your income is steady and reliable becomes one of the most important parts of the mortgage process. Lenders want to be sure that you can meet monthly payments over the long term. Even if your business is doing well, you may need to jump through more hoops to get the same approval as someone in full-time employment.

This doesn't mean you're at a disadvantage forever. With the right paperwork, preparation, and advice, many self-employed people are approved for mortgages each year. It’s just a matter of knowing what lenders are looking for and how to present your finances in the best way possible, using clear documents and helpful support.

What Makes the Mortgage Process Different for the Self-Employed

The main difference between employed and self-employed applicants is how income is measured and understood. A person with a fixed salary has a clear payslip and tax history that shows consistent earnings. A self-employed person often has more variation, and this can create doubt in the mind of a lender.

To help make sense of this, it's useful to understand the specific things that lenders view differently when you're self-employed. Being aware of these factors ahead of time allows you to better prepare for your mortgage application and avoid delays or confusion.

Proof of Income Over Time

Lenders usually want to see two to three years of full accounts or tax returns. These documents help them assess how stable your earnings have been. If one year was much lower than the others, they might use the lower figure or an average of all years to decide how much they think you can afford to borrow. If your income has grown each year, this will usually be seen as a good sign.

Business Type and Structure

The way your business is set up can change how lenders review your income. Sole traders are assessed on their net profit. Directors of limited companies are often judged on both salary and dividends, and some lenders may consider retained profit too. If you're in a partnership, your share of the profit will be used. Understanding what applies to you can help you prepare better and select the right lender from the beginning.

Personal and Business Finances

Mixing your personal and business finances can be confusing for lenders. It's much better to keep them separate. Having a dedicated business account, clear invoices, and well-kept records makes it easier to show where your income comes from and that it’s regular and dependable. This also shows that you are financially responsible and organised.

Income That Goes Back Into the Business

If you leave money in your business rather than paying it out to yourself, it might not be counted in your mortgage application. This is especially true for company directors. Some lenders will include it, but many won't unless you can prove it's available and could be drawn as income if needed. You may need your accountant to explain this in a letter as part of your application.

How a Mortgage Adviser Can Improve Your Chances

Using a mortgage adviser when you’re self-employed can make a huge difference. These advisers have experience with lenders who understand the self-employed market, and they know which ones are more likely to accept your type of income. This can save you a lot of time and help avoid being turned down. They are also useful if you have a unique situation or need a lender with flexible rules.

A mortgage adviser will help you get all your paperwork in order before you apply. This includes making sure your tax returns, accounts, and bank statements are easy to understand and correctly show your earnings. They can also help you spot gaps or problems before a lender sees them. This reduces your risk of rejection and helps you apply with confidence.

If you’ve got different types of income — for example, freelance work, contract jobs, or income from a small business — an adviser will help explain it all in a way lenders understand. This is especially helpful when your income doesn’t come from just one source or if it changes month to month. Their knowledge can turn a tricky case into a clear and approved application.

Advisers can also speak to lenders on your behalf. They may even be able to speak with underwriters directly to explain special cases or to add more detail. Their knowledge and contacts could be the key to getting your mortgage approved, especially if your case is slightly more complex than average. You can also save money, as advisers often know about deals that are not advertised publicly.

What Counts as Self-Employed Income in the Eyes of a Lender

Lenders are usually cautious when it comes to counting income from self-employed work. They want to be sure the money you earn is regular and ongoing. That means one-off jobs, one-time payments, or rare bonuses may not be included when your income is assessed. Regular clients, repeat contracts, or long-standing business arrangements are more helpful to show.

Sole traders will usually be asked to provide SA302 forms or full tax calculations and overviews from HMRC. These documents show your declared profit, which is what lenders base their decision on. If your profit has dropped recently, this could limit how much you can borrow. However, if the fall in income was due to a short-term event and you can show recovery, some lenders may still be open to approving your loan.

Limited company directors are normally assessed based on their salary and dividends. Some lenders will also count money left in the business, known as retained profits, but not all do. That’s why it’s important to understand how different lenders treat company income and to plan your finances with this in mind. If needed, your accountant can provide supporting letters to explain your income in more detail.

For those in partnerships, lenders look at your share of the business profit. This is often written clearly in the partnership accounts or tax return. If there is a formal partnership agreement, it can help prove your income share. Lenders prefer to see stability, so if your share varies a lot, they may use the average or lowest amount. Try to keep your income as consistent as possible leading up to your application.

Steps to Strengthen Your Application Before You Apply

If you are thinking about applying for a mortgage, the more you prepare, the better your chances. Many people are refused not because they don’t earn enough, but because they don’t show their finances in a clear way. Taking time to get things in order can make a big difference. A strong application shows that you are a low-risk borrower, even if your income is not fixed.

Here are a few things you can do to help your application stand out in a good way.

Keep Accurate and Clear Records

Make sure your business accounts are well-organised and up to date. Use a qualified accountant if possible. Not only does this give you accurate figures, but it also shows lenders you are responsible with your finances. Submit your tax returns on time and make sure the figures match across all documents. Mismatches or errors can raise red flags and slow down your application.

Save a Bigger Deposit

The more deposit you can put down, the better your position. A larger deposit means you need to borrow less, which reduces the lender’s risk. This can also unlock better mortgage rates. Aim for at least 10 to 15 per cent, but more is even better if you can manage it. Having a healthy deposit may also increase the number of lenders who will consider your application.

Improve Your Credit Score

Your credit score tells lenders how reliable you are with money. Check your credit report regularly to make sure there are no mistakes. Pay all your bills on time, clear any old debts, and try not to borrow too much just before you apply. Small steps like these can add up and make you look like a safer choice. A clean credit report can make up for some of the uncertainty that comes with being self-employed.

Cut Back on Unnecessary Spending

In the months leading up to your application, try to spend wisely. Lenders often look at your recent bank statements to see how you manage money. Avoid large one-off purchases and try to keep a good amount in your savings. This shows that you’re not only earning money but handling it well too. A good financial history tells lenders that you’re less likely to miss payments.