How can the self-employed get mortgages?

There are 3.3 million self-employed people in the UK. These people may have a problem finding a mortgage from a mainstream lender. Those is standard full-time employment are basically guaranteed to be paid, and can get references from their employer as well as be able to show payslip's proving their income. Mainstream lenders like this as it cuts down their risks and they are serving the majority.

Should you be self-employed or perhaps working on a short-term contract, you could be financially sound, and able to keep up payments easily, but that doesn't make it easy for you to prove you'll keep up payments to your lender. They want to know that you'll be able to keep up payments for 25 years, not just over the next year. Should you be on a short-term contract, you are not guaranteed to get another contract, and should you be self-employed you have to chase payments and are working on contracts as well.

A mainstream lender will want to see three years audited accounts from a certified accountant before they consider a mortgage for the self-employed. Even if you have this, your accountant may have helped you avoid tax by understating your profits for the past few years, (legally and according to GAAP principles) and this could come back to haunt you. Should you not have three years accounts, you may be able to get a self-certification mortgage by declaring your income, providing a certificate from your accountant, your last few years mortgage statements etc, and you are still not guaranteed a mortgage.

Recently, however, some specialist lenders have targeted the self-employment mortgage market by providing some innovative solutions that offer a more flexible approach to match the working pattern of someone who is self-employed. This means that they accept that when you are self-employed you may enjoy periods of high income and you may suffer from periods of low income. Ideally, your mortgage should reflect that, enabling you to overpay and underpay when you need, and not be so unaccommodating to you when you apply.

Mainstream lenders actually used to be more accommodating, they offered self-certification loans and non-status loans where your financial status wasn't confirmed by an employer. But they rarely do this now, and their lending criteria has stiffened. You will need to show an upturn income every year and probably business plans for the future. You will also need to provide a large deposit as you are likely to be lent only up to 75% of the value of your home.

You should look out for the specialist lenders who don't penalise you for your lack of status, trust your accountant, and might offer you up to 95% of the value of your home.