Q – I am self-employed; can I still get a mortgage as I don’t pay myself a high salary?

Discussion in 'Mortgages' started by The Mortgage Broker, May 16, 2017.

  1. The Mortgage Broker

    The Mortgage Broker New Member Forum Partner


    Most people assume that you need 3 years’ worth of trading accounts to get a mortgage – only a few lenders now have this approach to their lending criteria in today’s market. There are lenders out there who will lend to you based on just one year trading and one year’s accounts so all is not lost. There are also lenders who will lend to you based on two years’ tax returns and they won’t ask for your accounts so there is a potentially better deal to be had by approaching this type of lender – An experienced mortgage broker will know the lenders criteria and will be able to look at all of these options to see which deal offers you the best value, whilst at the same time meeting the lenders underwriting criteria.

    You haven’t mentioned in your e-mail if you are a sole trader or a Limited Company as this can also affect the lender we approach on your behalf. If you are trading via a Limited Company you have probably been advised to take a minimal PAYE salary and the rest of your annual package in the form of dividends. Thankfully, dividends are taken into account, so if you draw a small salary this should not be a stumbling block for you. We also have access to lenders that will look at the overall net profit of the business, rather than what you have taken out of the business as and when required. If you are a sole trader your net profit will be used.

    Your next step would be to send through your accounts and tax returns, along with a budget planner and of course some personal detail. This would enable us to run these figures through a selection of potential lenders’ affordability calculators allowing us to get an idea of what level of borrowing could be available to you.
  2. Nicholas Wallwork

    Nicholas Wallwork Editor-in-Chief Staff Member Premium Member

    Hi Darren @The Mortgage Broker this option sounds interesting... this might help me out for my current house move... please email me about this... many thanks!
  3. Phil1979

    Phil1979 New Member Forum Partner

    Interesting post, thanks for the info. I am self employed (but due to varying my actual work my accounts have varied over the last 5-6 years quite a lot). If I had a strong years accounts 2 and 3 years ago, but the last tax year was lower, how would a mortgage provider look at this scenario?

    (I am talking about for a potential buy to let... do they also take into account the rental income that a buy to let would make?)

    Thanks in advance

  4. The Mortgage Broker

    The Mortgage Broker New Member Forum Partner

    Hi Phil,

    Lenders will look at the most recent set of accounts if they are lower than the previous years and with a buy to let, lenders have thresholds of income to be met.

    Some lenders will lend on income under £20k (PAYE and dividends), others will only lend with provable income above £20k and the majority above £25k.

    A lender will consider the rental income for the buy to let property as part of their other criteria that has to be met, however they will not use it for the income criteria mentioned above.

    I am happy to look at the latest set of accounts for you to advise what options could be available, just let me know...


  5. Phil1979

    Phil1979 New Member Forum Partner

    Thanks for the info Darren. Once i've finished my research into which area to invest in (which will decide the level of mortgage required - it's between 2 areas) I'll definitely be in touch to pick your brains! :)
  6. Peter123

    Peter123 New Member

    Lenders are primarily concerned that all applicants, including self-employed workers, can consistently repay the mortgage. They'll have to see that your income is high enough to pay for the mortgage and likely to continue, and that you have a good track record of repaying your debts.
  7. diyhelp

    diyhelp Active Member

    This brings about the eternal conundrum, keeping your income down for tax purposes while maximising your income for mortgage funding purposes. My advice, take advice!
  8. FWL

    FWL Member

    I would be interested to hear how you got on with your self-employed mortgage funding. How did you tackle the low income issue?

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