Working for Yourself

There can be numerous benefits from being Self-Employed, and if things are going well, you’ll generally see immediate financial returns. However, historically, there was often an issue when applying for a mortgage.

On the positive side, a number of lenders appear to be more accepting these days of the variable income streams of a self-employed worker, and also those salaried employees for whom a sizeable part of their income stream is made up of bonuses, commission, or overtime.

Unfortunately, this more supportive approach by lenders is not as understood as it could be by many amongst the 4.2m self-employed – who broadly equate to a sizeable 1 in 8 of all those in employment.
(Source: Office for National Statistics, Labour market overview, October 2024)

And this is even more pronounced if we look at those who are not yet on the property buying ladder. First-Time Buyers, who are self-employed are still twice as likely to have been rejected for a mortgage (39% compared with the national average of 20%).

It’s then no surprise that four out of 10 First-Time Buyers opted to give up being self-employed in order to secure a mortgage.
(Source: Aldermore Bank, October 2024 research)

Talk to us…

However, this route does not always need to be the case, and that’s why it makes sense to take professional advice. We know the hoops the self-employed need to jump through, and how to best present their situation (whether a first-time buyer, or not). And, can hopefully obtain the most suitable outcome for them.

Each lender will have different criteria for assessing and approving a mortgage. Some will base it on the latest year’s income, while others may opt for seeing the last two or three years.

Also, lenders may (if you’re a limited company) use salary and dividends, or perhaps salary and a share of net profits, or maybe a share of gross profits.

Put simply, it’s a minefield, and one where a self-employed worker really should obtain advice. By taking this approach for their mortgage needs, they can hopefully avoid exiting the self-employed sector, and continue to fully focus on what they do best – delivering on their own business offering.

Additionally, think about the importance of protecting your income stream

Income Protection insurance is designed to pay out a monthly income, if you are unable to work due to an accident or illness. Yet many self-employed workers mistakenly believe that they’ll never qualify for this – which is generally not the case.

And, of course, the self-employed worker is likely to be more financially exposed should they not be earning, and won’t have a traditional safety net, such as sick pay.

Also, if you operate through a limited company, then the option exists for the company to pay the monthly premiums.

There are a multitude of options to consider, if taking out this type of policy – such as: long-term vs. short-term plans; or when the payments kick in after claiming for an accident or illness.

All the numerous options will impact on both what you pay out each month, and the amount you could be claiming, if successful.

Whatever your situation, we’d fully assess the suitability of the options on offer. And you can take comfort from the fact that we operate in this sector day-in day-out, plus have the qualifications and expertise to deliver advice that meets your needs.

Your home may be repossessed if you do not keep up repayments on your mortgage.