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Updated: February 23, 2023
Here’s everything you need to know about self-employed mortgages, explained by me, a self-employed mortgage. I’m a self-employed mortgage advisor that spent nearly a decade in accountancy before becoming a mortgage advisor. If there’s something specific you’d like to ask you can get in touch by getting started or submitting a question to an expert mortgage advisor.
A decision in principle is also called an “agreement” or “mortgage” in principle. They all refer to the same thing which is an initial yes from a mortgage lender. This is here to give you an idea of what you can expect to borrow so you can understand your budget.
A decision in principle will also allow you to see what mortgage rates you are eligible for so you can understand your potential mortgage monthly repayments. This will help you understand your finances for any home you buy.
Many estate agents will ask to see a decision in principle if you would like to place an offer on a property. This acts as a way of showing the agent you can likely afford to purchase the property and that you are a serious buyer. Remember, you can use any mortgage advisor you like, even if they suggest otherwise.
We’re here to help remove the confusion and stress from self-employed mortgages
Generally speaking, 2 years of accounts or tax returns is ideal but it is possible to get a mortgage with only 1 year’s accounts/ Tax return. This will depend on your field of work before becoming self-employed and other personal circumstances.
Heres’ a breakdown:
1 year tax return/ accounts – You will have less options than with only 1 year’s trading info. You will have a better chance if you have a long track record in the same industry before starting a business.
2 years tax returns/ accounts – you will have more options with mortgage lenders. Most lenders will average your 2 latest years of income but some may allow you to use your latest year.
3 years or more tax returns/ accounts – you will have more options with mortgage lenders. Most lenders will average your 2 latest years of income but some may allow you to use your latest year. You may also be able to access lenders that specifically require 3 years of trading history.
Lenders will usually look at the combinations or Dividends taken plus Salary or Salary plus Net Profit to calculate mortgage affordability.
This means you can boost your affordability by catering to where the majority of your income sits. If you have retained most of your income in your business profit,then using a lender that looks at salary plus net profit will allow you to potentially obtain a larger mortgage.
This will depend on several things such as:
We’re here to help you understand exactly how much deposit you can expect to need. This can help you budget with clarity and understand how much you can keep back for furniture etc.
We’re here to help. Whatever your circumstances, drop your question here to get an answer from an expert mortgage advisor
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