By: Sarah Williams

The COVID-19 pandemic has resulted in numerous job losses and redundancies across the country, prompting more people to pursue self-employment as a means of income. However, securing a mortgage while self-employed can seem overwhelming, given the lack of a steady, guaranteed monthly income. In this article, we will explore the available options for self-employed individuals looking to obtain a mortgage.

While self-employed borrowers may face additional hurdles in securing a mortgage, it is not an impossible feat. Lenders generally view self-employed borrowers as slightly riskier due to the irregular nature of their income and the absence of an insurer to verify their salary. As a result, lenders require more information to establish a borrower's suitable "track record."

There are various types of self-employment, including sole traders, partners in a business, and individuals who own a 20%-25% stake in a limited company from which they derive their primary income. While directors of a limited company are not technically self-employed, they still fall under the same category as employees of their own business.

Most lenders offer the same mortgage deals to self-employed and employed individuals alike, but lenders may request additional proof of a borrower's ability to make their mortgage repayments. This may include demonstrating their average monthly income as well as their regular monthly expenses, such as subscriptions and household bills. In addition, key documentation requested from self employed individuals, are tax calculations provided from a registered accountant and tax overviews from the government. Lenders may require these figures for up to three years to ensure a borrower's income is somewhat regular and reliable.

For those new to self-employment, the requirements for obtaining a mortgage may differ. Specialist lenders who have experience with mortgage applications for those with less than a year of self-employment are available. It is recommended to consult with an adviser who can provide tailored advice and the best outcomes for your unique situation. Most lenders require at least two years of self-employment, so if you haven't quite reached that milestone, an adviser can help guide you towards the most suitable options.