Mortgage advice for sole traders, company directors and contractors.

Why your own bank may not be the best place to start.

If you're employed, your mortgage application is largely a numbers exercise, payslips in, decision out. If you're self-employed, it's a story. Lenders need to understand how you earn, how stable it is, and which numbers on your accounts actually represent your real income.

Many lenders rely heavily on automated assessment, and self-employed income doesn't always fit neatly into it. Knowing how each lender treats your type of income helps you avoid applying where you're unlikely to be accepted, and avoid the extra credit searches that come with repeated applications.

What lenders actually want to see.

1. Two years of accounts (or SA302s)

   Most lenders want two full tax years. A handful will consider one year if your trading history is otherwise solid, that's where knowing the market matters. We'll focus on lenders whose criteria fit your situation.

2. An accountant's reference

   For most lenders, this needs to come from a qualified accountant (ACCA, ACA, CIMA, etc.). If your accountant isn't on that list, we'll flag it before you submit, better than discovering it after the lender does.

3. The right income figure

   This is where most self-employed applications go wrong. Different lenders use different definitions. Some take the latest year. Some take an average of the last two. Some take retained profits for limited companies, some don't. Picking the right lender for your income shape is where the broker earns the fee.

4. Clean recent personal banking

   Lenders will want three months of personal and business bank statements. If your statements show gambling, persistent overdraft use, or undisclosed loans, deal with that before the application. We'll tell you exactly what they'll be looking at.

5. A credible deposit story

   Larger deposits buy you flexibility. If your trading history is thin or your last year was unusual, a bigger deposit can unlock lenders who'd otherwise say no. We'll show you what difference each level, 10%, 15%, 25%, actually makes.

If you're a limited company director.

This is where the choice of lender can make the biggest difference, and where understanding company accounts matters.

• The standard approach: salary + dividends

  Most lenders take your director's salary plus dividends drawn in the last year (or an average across two years). Straightforward, but if you've left profit in the company to grow the business, you're being assessed on a fraction of what you actually earned.

• The better approach: salary + net profit

  Some lenders will use salary plus your share of company net profit. For owner-managers who leave profit in the business, this can produce a higher assessed income. We can tell you which lenders currently offer this.

• Watch the year-end profile

  If your latest accounts dip below the prior year, some lenders will lean on the lower figure. Others will accept the average. Picking the right one matters.

If you're a contractor.

• The day-rate method

  Some lenders will assess contractors on an annualised day rate, for example day rate × 5 × 48 weeks, without needing two years of accounts. The exact calculation varies by lender. As an illustration only, £500 a day on that basis is £120,000 of assessed income. What you could borrow then depends on the lender's income multiple, your outgoings and a full affordability assessment.

• What they want in exchange

  A current contract (or recent contract history), evidence of continuous trading, and usually a track record in your sector. The criteria are specific, but for contractors with a steady contract history this route can give a higher assessed income than working from accounts.

• Inside vs outside IR35

  Lenders treat inside and outside IR35 contracts differently. It can affect which income figure they use and which lenders are available to you. We'll walk you through it.

Mistakes we help self-employed applicants avoid.

• Taking minimal salary just to save tax

  If you draw £12k salary and bank the rest as retained profit, most lenders will treat you as a £12k earner. If you're planning to apply, it's worth speaking to your accountant about how you draw income in the year or two beforehand, as it can make a real difference to what lenders assess.

• Applying to your business bank because it's convenient

  Your own bank is convenient, but its mortgage is not necessarily the right one for you. It is one lender out of more than ninety.

• Applying before your latest figures are finalised

  If your most recent year was your best, you want lenders to see it. Sometimes it's worth waiting a few weeks for your tax return or company accounts to be completed. Sometimes it isn't. We'll tell you which.

• Making multiple speculative applications

  Several hard credit searches in a short period can make you harder to place. It is the search that is recorded on your file, not the lender's decision, so one properly researched application beats three speculative ones.

Common questions.

• How many years of accounts do I need?

  Most lenders want two years, some want three, and a useful handful will lend on just one year's figures. One year of accounts narrows the pool but doesn't close it.

• Do I need a bigger deposit because I'm self-employed?

  Usually not. Minimum deposit requirements are generally the same as for employed applicants. What changes is how your income is assessed.

• I keep profit in the company. Does that count?

  With the right lender, yes. Some lenders assess salary plus your share of net profit rather than salary plus dividends, which can make a big difference if you deliberately leave profit in the business.

• I recently went from employed to self-employed. Am I stuck?

  Not necessarily. If you're contracting in the same line of work, some lenders will work from your day rate without waiting for accounts. Genuine start-ups usually need at least one year's figures.

Discuss your self-employed application →

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