Just wondering what the situation is generally for self-employed folk getting mortgages, in terms of how many years’ accounts you need to show, what lenders will lend in relation to annual earning etc? Anyone got any recent experience or industry knowledge? I know it depends very much on the individual, but thought I’d get some basic general info here perhaps. Ta v much.

It all depends on the lender & type of mortgage… You can sometimes sort it with a letter from your accountant.

I got my mortgage 2 years ago absolute nightmare. Been self employed for nearly 10 years. Halifax go by 3 years and average it out so 1 bad year can cause havoc. The mortgage company dealt with my accountant if I remember rightly though. Some other company’s I believe can average 5 years of books.

I just had to show 3 years accounts – dunno if that was standard?

Thanks for this. And what are companies lending – 3.5 times the average income or what? I’ve no idea how it works now. I’m off to see my current provider in a week or so, but I’ll possibly need a new mortgage form a new provider in order to move house. Thanks again.

I think it might also depend the size of your deposit. I moved back with with my parents and saved for 3 and a bit years, had around 47k saved up. From what I remember they offered to lend approx £100 to 110k (which at the time was just over 3 times my income before tax), but I only ended up borrowing 67 as didn’t want to stretch myself. Think I just got a deal in principle with HSBC (who my personal/business accounts are with), found the property I liked, then used a comparison site to find the best mortgage deal, ended up going with the Woolwich. Also make sure any searches etc the bank carry out on the property are actually 100% required, I ended up paying £300 for one which turned out wasn’t necessary, think the bank is on commission.

These are really helpful.
http://www.themortgagebroker.co.uk/

I work for a bank and arrange mortgages every day. I presume you’re sole trader? You’ll need to provide the company with 3 years net profits figures when you apply, they will then contact your accountant to verify those figures. These days they will take a mean average of your 3 yrs figures. The bigger your deposit the easier it’ll be, best is 25%+ but you should be able to get a mortgage up to the lenders max ltv, 90%? It’s always worth getting 3 months bank stats together and get together a general idea of what your outgoings are. All lenders carry out affordability checks these days so it’s not the old 3 times or 4 times salary. BUT generally speaking if you have little or no debts you can get up to 4.5 times mean average net profs. This is reduced if you have debts. If you have to pay childcare then you’d be wise not to disclose this if finances are tight, grandparents look after the little one, don’t they? 😉
Any specific questions? i’ll do my best. 🙂

On a similar note, I’m considering taking the self employed option as a result of redundancy. Wife is in full time employment. We are coming to the end of our 5 year fixed rate on our mortgage (sadly we paid well over the odds interest wise as we had a small deposit) and are expecting our interest rate to drop at that point reducing our monthly payments fairly significantly.. Just wondered what, if any, impact my quite drastic change of circumstances would potentially have on our existing mortgage?

jekkyl – thanks for this, very helpful (though I appreciate it’s just a rough guide). I’ll probably have a 40K deposit (around 25% of the value of properties we’ll be looking at) from equity, but the problem is my average earnings aren’t great coz I’m a part-timer really: a sole trader/lifestyle junkie who spends way too much time biking! Still, got absolutely no debts whatsoever apart from my current interest-only mortgage (which I’ve had for about 10 years – yikes, I know!). Plus no kids and our outgoings are pretty low. I guess I might need to persuade a lender that I can almost certainly earn more if I just start to market myself, and that I’m happy to finally start paying a mortgage.

fervouredimage – Member
On a similar note, I’m considering taking the self employed option as a result of redundancy. Wife is in full time employment. We are coming to the end of our 5 year fixed rate on our mortgage (sadly we paid well over the odds interest wise as we had a small deposit) and are expecting our interest rate to drop at that point reducing our monthly payments fairly significantly.. Just wondered what, if any, impact my quite drastic change of circumstances would potentially have on our existing mortgage?

None if you stay with your existing mortgage company, there’s no underwriting for retention switch. But you won’t be able to change lenders without at least one years accounts unless your wife’s income can support the loan by itself.

wl – Member
I’ll probably have a 40K deposit (around 25% of the value of properties we’ll be looking at) from equity, but the problem is my average earnings aren’t great coz I’m a part-timer really: a sole trader/lifestyle junkie who spends way too much time biking! Still, got absolutely no debts whatsoever apart from my current interest-only mortgage (which I’ve had for about 10 years – yikes, I know!)

You are very unlikely to get a new mortgage as interest only, unless you have a proper repayment vehicle (endowment?) If you’re increasing your mortgage you’re highly unlikely to get the increase on interest only. The government (FSA) are clamping down a load, no new lending on IO and it’s causing a lot of headaches. Downsizing is not suitable, making overpayments is not suitable, depending on inheritance is not suitable. and this bit

I guess I might need to persuade a lender that I can almost certainly earn more

no lender will lend against what you could earn but will only work with what you have earnt. Don’t stress it though mate, get out on your bike. If I could get away with earning less and biking more I’d be up the forest. 😀

Lol, cheers jekkyl. To be honest I’ve had a great time taking advantage of the IO mortgage – it’s enabled me to do a lot of smart things I couldn’t have done otherwise – but now it’s time for me to get a bit real and think ahead. I’m 41, not 24, unfortunately. We want to move house and to start paying off a mortgage, so not getting another IO isn’t a problem. I just hope getting a new mortgage won’t be a problem either, but at least my part-time income has been consistent, and I’m also debt-free and have some equity. Guess it could be a lot worse. Fingers crossed.