Are you a sole trader, own a limited company, or work under a zero-hour, fixed term or CIS contract?
Not having PAYE status – AKA a standard employed job – can be a minefield when it comes to getting a mortgage.
With an employed salary it’s easy for a bank or building society to confirm your income, whether it’s through payslips, a contract, or past P60s.
But when you’re self-employed or contracted, that income isn’t as guaranteed, or might only be guaranteed for a short amount of time.
A recent survey¹ showed that 43% of self-employed people – nearly half – feel their employment status negatively affects their ability to buy a home.
And, this goes up for other similar employment types – 57% of freelancers, 60% of zero-hours contract workers and 68% of contractors (68%) all felt the same.
When asked why, a fifth of these said it was down to varying income, and that they’d either stayed renting for longer, or permanently put their dreams of owning a property on hold because of it.
We’re here to tell you it’s not all bad news though! Here at Beewise, we’re passionate about helping people buy their own home, no matter what their circumstances.
There are so many banks and building societies out there, and while some may have stricter criteria around non-employed applicants, there are plenty of others that don’t!
As self-employed specialists we’re here to help. This month we bust myths, share what lenders accept for mortgage borrowing, and aim to inspire you to get on the property ladder.
How long do you need to be self-employed or contracted to get a mortgage?
It’s commonly thought you need at least 2 or 3 years’ self-employed accounts to get a mortgage, but there are actually lenders that’ll do it on one year’s books!
So, you might be eligible for a mortgage already, or could be in April 2025 if you’ll have your first year of accounts then.
If you’re on a zero hour contract, most lenders want you in the role at least 6 months, but if you’re on a fixed term contract, you could be accepted from day 1 with experience in the same industry!
The same applies to CIS contractors – while some want you in the job for 1 to 2 years, others consider you straight away if you’ve got previous history of working in the industry before.
If you’re a first time buyer, give us a call on 01934 204 841 or email us to arrange an appointment and find out if you could start searching for a dream home now.
What type of income do lenders accept when you’re self-employed or contracted?
There isn’t a definitive answer for this, as different lenders accept income types.
If you’re a sole trader looking to use self-employed income, all lenders will use your net profit figure, so the amount you earn after expenses.
This is important to remember, because if your gross profit is £60k but you claim back £40k in expenses, only that £20,000 net profit can be used towards mortgage affordability.
If you’re a limited company however, there are lots of salary combinations lenders use.
Some banks calculate mortgage borrowing based on your salary and dividends, some do it on salary and your company’s net profit, and some on your salary and company’s gross profit.
Using your local Beewise mortgage advisor means you could borrow more than you thought, as we’ll know the most suitable lender for your situation!
Mortgage lenders also consider other income on your tax return, such as profit from savings, rental income, and can even use foster income and maintenance towards affordability.
Working with a mortgage broker – like us! – means we’ll review your situation as a whole, and factor in what income and expenditure lenders use to save you the stress and hassle.
If you’re contracted, there are lots of ways affordability’s calculated. It could be on day rate, weekly or monthly income, or by taking an average of 3, 6 or 12 months’ worth of earnings.
By working with Beewise you can be confident we’ll know the right bank or building society to put you with, and which figures are best to use, helping you get on that property ladder.
What documents will lenders want as proof of income?
This depends on what type of employment you’re in. If you’re self-employed, it’s usually your tax calculations – AKA SA302s – and tax overviews.
This is because they show a clear breakdown of your income, and any tax, national insurance and student loans paid.
They might ask for the last year, 2 years or 3 years’ worth, and business bank statements too – 3, 6 or 12 months’ worth – to show your current income is consistent with those numbers.
If you’re a limited company owner, a lender will usually ask for your latest year’s accounts, or latest 2 years accounts, in addition to the above.
But, some are happy to have your income verified by an accountant, which can be handy if you’ve had a discrepancy in earnings.
For example, you might have had a less profitable year recently due to investing in growing the business, or had a dip in profits due to maternity leave, but it’s now picked back up.
Your local Beewise mortgage advisor will liaise with underwriters on your behalf, giving them a clear picture of your situation, so you can get the best outcome for your circumstances.
All you need to do is send over your paperwork and leave the rest in our capable hands, as we’ll do the running around for you!
If you’re a contractor, most banks and building societies want to see a copy of your contract and recent payslips as a minimum. But, we’d advise on your situation when you get in touch.
Do banks and building societies lend less if you’re self-employed or contracted?
Historically they have done, yes. Especially post-pandemic, lenders were more restrictive on the amount they’d lend self-employed people towards a mortgage.
Lots of small businesses, sole traders and freelancers were hit hard during and after covid, and it made banks cautious about how much they let people borrow, especially first time buyers.
Most companies have amended their policies now though, and self-employed lending is mainly on a par with employed lending.
However, did you know lenders calculate affordability in different ways, regardless of your job type?
Using Beewise for your mortgage could mean you’re able to borrow more, as we work with a whole host of different lenders, so can get you the maximum towards your new home.
And, we often have access to exclusive deals through our network, Quilter Financial Planning. So, not only could you afford more, we could save you money too!
How much deposit will you need to put down?
It’s totally up to you! The majority of banks and buildings societies don’t have restrictions on the amount of deposit a self-employed applicant or contractor puts down.
So, you could get a mortgage with as little as 5% deposit, and there are even lenders offering 100% mortgages now too!
Get in touch today and find out your options by calling 01934 204 841, or click here to email your local self-employed mortgage specialist at Beewise.
What are the next steps to see if I can get a mortgage?
Contact Beewise! We make self-employed and contractor mortgages stress free as we do all the legwork for you, matching your situation with the most suitable lender.
And, your local advisor’s on hand with outstanding service and expert advice from the minute you contact us, right up until you get the keys to your new home.
With over 330 5 star Google reviews, there’s a reason why our clients recommend us! Here’s just some of the ways we help you as standard:
• Accurate borrowing calculations, with maximum lending from the mortgage market
• Securing a mortgage in principle – often within 24 hours of getting your paperwork
• Advice on how much to offer, potentially helping you save thousands!
• Guidance on which mortgage, fixed deal and term suits you best
• Recommending trusted solicitors we’ll chase up regularly for you
• Seeing your mortgage through to completion with help at every step
• Keeping an eye on interest rates, and switching if they reduce
• Evening and weekend support via phone call, text, email or in person
To chat to your local Beewise advisor, ring our office on 01934 204 841 or email to arrange a call, with evening and weekend appointments available.
Looking for more expert mortgage advice? Check out these other helpful blog posts!
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