Joint Mortgage Self-Employed
Joint Mortgage Self-Employed
Paul Holland talks us through joint mortgages when one applicant is self-employed.
Can you get a joint mortgage if one applicant is self-employed?
You can certainly get a mortgage if one of you is self-employed. It’s not necessarily the employment type or even the combination of employment types that determine your mortgage chances.
You could both be self-employed, or one be self-employed and one unemployed. Ultimately, you just need some sort of income to drive affordability. The main difference is in how your income is assessed compared with someone who is employed.
To calculate a mortgage loan, different multiples are applied to your annual income. Let’s say that an underwriter decides you earn £50,000 a year. You could borrow – for example – four and a half times that amount. Meanwhile your employed partner with the same income might have a multiple of five applied to their portion of the income.
That’s the kind of thing that could differ between the two of you, when you’re bringing different types of income to the table on an application.
What documents do we need if one applicant is self-employed?
Generally speaking, if you’ve got any self-employed income you will have had to submit a tax return to HMRC. Once you submit that tax return you receive a Tax Year Overview document, also known as a tax calculation. That’s going to state the self-employed income you received for the year.
It doesn’t matter if you’re a sole trader, a limited company director or a contractor, you’re always going to get a tax calculation and overview document. Those two are always going to be handy.
If you have a limited company, you’re going to be submitting company accounts, in which case the lender is likely to want to see them. If you’re a contractor you will have some kind of written contract – you may need that too for lenders. Plus, if you set up a separate bank account for your business income, lenders will want to see those bank statements too.
What criteria need to be met if one applicant is self-employed?
Criteria changes a lot from lender to lender. Each one has their own approach for the self-employed, but one important area for all of them is how long you have been self-employed for.
Some lenders can accept as little as one year’s self-employment income, some need a minimum of two years and some will only accept you with three years or more. So, where you are on that self-employed journey will influence the lenders we look to approach with your application.
How much can you borrow if one applicant is self-employed? What deposit would I need?
The minimum deposit is always going to be 5%. The bigger the deposit, the easier it is to obtain a mortgage offer, no matter what employment type you have. You can still obtain 5% deposit mortgages when self-employed or as a managing director. It’s just easier if you have 10% or 15% saved up.
In terms of how much you can borrow, your self-employed income will be evaluated by working out the averages over two or three years. That figure will be punched into the calculator and from there, it’s similar for all applicants whether they’re PAYE, self-employed, managing directors or contractors. The only difference is in how lenders derive that figure.
Does a mortgage have to be in joint names?
It doesn’t have to be joint names. You can have an individual application as a self-employed person, so don’t be concerned if you’ve only got self-employed income.
You could also have a joint mortgage where both people have self-employed Income. That’s not an issue at all. Once the lender has assessed your annual income, the remainder of the process is very similar to everybody else.
It’s very common for people to overcomplicate the self-employed side of things with mortgages, but once you’ve got that income figure it’s all plain sailing.
What else do we need to know about self-employed joint mortgages?
There’s lots! This is a very in-depth and detailed area. It’s not as straightforward as a mortgage for someone on a PAYE basis. That’s why we often see people in this sector who have failed to get a mortgage offer elsewhere, but thanks to our experience, we’ve been able to secure something relatively easily.
We have good knowledge of self-employed mortgages. So the main takeaway from this podcast is that you should seek the right advice if you’re a sole trader, a managing director or contractor – we’ll make it much easier and faster to find you a mortgage that suits you.
Your home may be repossessed if you do not keep up with your mortgage repayments.