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How Much Can Self-Employed Workers Borrow for a Mortgage?

Professional Mortgage Advice

A self-employed dress maker

Attempting to secure a self-employed mortgage can prove difficult especially if you’ve only recently become self-employed.

In this blog post, we attempt to cover the factors that will influence how much self-employed applicants can borrow.

Understanding the Basics of Self-Employed Mortgages

Despite being self-employed, a mortgage deal can still be obtained. You just need to show lenders that although your income may fluctuate month-to-month, overall it’s steady and reliable enough for you to keep up with repayments. To do this, lenders will look closely at your tax returns and business accounts from the past two or three years.

They’ll be particularly interested in seeing proof of regular work – not just one-off gigs – as well as evidence of ongoing contracts or bookings which suggest future income stability. For example, if you’re a freelance web designer with several long-term clients who commission work regularly, then even though your earnings may vary each month depending on how many projects come in – lenders would likely see this positively because there’s consistency in demand for your services. MoneySuperMarket provides some useful insights into what banks typically require.

  • Credit Score: Your credit score plays an essential role too; ensure it’s healthy by keeping debt levels manageable and paying bills promptly.
  • Savings: A hefty deposit often helps swing things more favourably towards granting larger loans.

Key Factors That Influence Mortgage Borrowing for Self-Employed Individuals

Mortgage lenders in the UK consider several factors when assessing how much a self-employed individual can borrow. One crucial aspect is your income.

The more you earn, the higher your borrowing potential. It’s not just a straightforward matter. Lenders want proof of steady earnings over a significant period – usually two years’ worth of accounts or tax returns.

Affordability Checks and Credit Scores

Lenders also carry out affordability checks. These help them decide if you can manage mortgage repayments alongside other expenses. A good credit score improves your chances too, so make sure to fix any issues before applying.

Trading Style Matters

Your trading style (sole trader, partnership, or limited company) influences what counts as ‘income’. For instance, directors of limited companies might use dividends instead of a salary to boost their income.

Tax Returns Are Essential

HM Revenue & Customs (HMRC) form SA302 shows your annual income and is often requested by lenders during the application process.

Remember this: every lender has different criteria – some may be more flexible than others. It pays off to shop around.

How Lenders Calculate Mortgage Affordability for Self-Employed Persons

Lenders consider several factors when figuring out how much self-employed individuals can borrow. It’s not a case of one size fits all, but more like having a bespoke garment crafted – it needs to be the perfect fit.

Your average income over the last two or three years often forms the base of calculations. The Money Advice Service points out that lenders will want to see this income history before making their decision.

Average Income and Profit Retention

The key factor is your profit if you’re running a business. The lender wants to know how much you keep after expenses because that’s what is available for mortgage repayments.

If you have an irregular income, some lenders might use your lowest yearly earnings instead of an average figure from recent years. This conservative approach ensures they lend responsibly and reduces risk on both sides.

Credit Score Importance

Your credit score matters too, although its weight may vary between different lenders. A high score generally makes getting approved easier and could potentially let you borrow more money. Experian UK, provides valuable insights into understanding credit scores in detail.

Tax Returns: A Crucial Document

In addition, tax returns are crucial as they offer a transparent view of your financial status over time which lets lenders assess affordability accurately. So keeping up-to-date records helps streamline the process.

The Importance of Tax Returns in Mortgage Applications

As a self-employed individual, your tax returns hold the key to unlocking potential mortgage borrowing. Lenders scrutinise these documents closely because they paint a clear picture of your income.

Your Self Assessment tax return, also known as SA302, provides an annual summary of your earnings. It’s like giving lenders X-ray vision of the health of your business finances.

Now you might ask, “Why do lenders care so much about my tax returns?” Well, think of it this way: Your favourite restaurant wouldn’t start cooking without checking their ingredients first, right? Similarly, before dishing out mortgages to self-employed folks like us at Millenium Mortgages, lenders need to check we can ‘cook up’ our repayments on time.

The Money Advice Service suggests showing consistency and stability through multiple years’ worth of tax returns can increase chances for approval.

A lender isn’t just interested in how much money you made last year but wants evidence that those numbers are going to stay consistent or even improve. This is why having well-prepared and detailed accounts will help give them confidence in lending to you.

Common Challenges Faced by Self-Employed Individuals When Applying for Mortgages

The route to procuring a mortgage may be more intricate for self-employed persons. Obstacles may be encountered on the journey to obtaining a mortgage if you are self-employed, yet it is not impossible.

Inconsistent Income

For one, inconsistent income is often a stumbling block. Unlike salaried employees with steady paychecks, your earnings may fluctuate month-to-month. This can make lenders nervous about your ability to keep up with regular mortgage payments.

Evidence of Earnings

Secondly, providing evidence of earnings can be trickier when you work for yourself. Lenders need proof you’ll be able to repay the loan over time and will usually ask for at least two years’ worth of accounts or tax returns.

Credit History Checks

A third challenge comes in the form of credit history checks – these might reveal past financial difficulties which raise red flags for lenders. Improving your credit score can help overcome this hurdle.

Finding A Suitable Mortgage Product

Last but not least is finding an appropriate mortgage product. Many mainstream lenders don’t cater specifically to self-employed individuals so it’s crucial to find ones who do understand and support independent workers like yourself.

Strategies to Increase Mortgage Borrowing Potential for Self-Employed Individuals

The world of mortgages can feel like a maze. But, don’t worry. Self-employed individuals can employ certain strategies to enhance their borrowing capacity – here’s how.

Maintain Clear and Consistent Financial Records

Lenders love clarity. So, make sure you keep your business accounts up-to-date and easy to understand. It’s much like keeping your desk tidy; it just makes everything run smoother.

Maximise Your Income Declarations

You might think reducing your taxable income through expenses is smart, but lenders will only consider the net profit when assessing how much they’ll let you borrow. It’s akin to dressing up for an interview – you want to show yourself in the best light.

Show Stable Business Growth

A stable or growing income over two years not only reassures lenders about your financial stability but also potentially increases how much they’re willing to lend. Money Advice Service provides more detailed information on this topic.

Hire A Professional Accountant

An accountant isn’t just there to do the maths; they help translate those numbers into ‘mortgage lender’ language.

Comparing Different Mortgage Options for Self-Employed Individuals

Discovering the ideal mortgage can be likened to selecting a suitable pair of shoes – you have to test out various styles, decide which is most suited for your requirements and always check if it’s within your budget. You need to try on different styles, see what fits your needs best and always check if you can afford them.

The first option many self-employed individuals consider is a Standard Variable Rate (SVR) Mortgage. It’s quite flexible but beware, rates can go up as well as down.

Fixed-rate mortgages are another popular choice. With these, your monthly payments stay the same over an agreed period. Handy for budgeting, especially when freelance income varies month-to-month. More about this at Which?

  • Discount Mortgages: These offer reduced rates for set periods but remember they’re often tied to SVRs so could increase later.
  • Capped Rate Mortgages: They provide a ceiling on how high the interest rate may rise which helps keep costs predictable during volatile times.
  • Offset Mortgages: This unique style links your savings account with your mortgage balance to potentially reduce overall interest costs.

You’re not limited though. Specialist lenders also offer mortgages designed specifically for self-employed borrowers. They look more closely at individual circumstances rather than just relying on algorithms and standard criteria.


Understanding the mortgage game when you’re self-employed can feel like a challenge. But with the right knowledge, it’s manageable.

You’ve learned how factors such as tax returns and affordability calculations impact your borrowing potential. You now know more about why these elements are crucial in answering “How much can self-employed borrow for a mortgage”.

We’ve navigated through common hurdles that might pop up during your application journey, but remember, each challenge is an opportunity to learn and grow stronger.

Above all else, remember this: knowing what influences your borrowing capacity allows you to develop strategies to increase it. Your financial future is in your hands!

The information contained within was correct at the time of publication but is subject to change.


Is it difficult to get a mortgage if you are self-employed?

Borrowing as a self-employed individual can be trickier. Lenders scrutinise income stability and business performance, but with proper documentation and preparation, success is attainable.

How many times your salary can you borrow self-employed?

Lenders typically let you borrow up to 4-5 times your annual profit before tax. But this depends on the lender’s criteria and your financial health.

Can I get a mortgage with 12 months self-employed?

Few lenders might accept just one year of accounts, although most prefer two or three years for reliable proof of earnings.

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