Being your own boss comes with plenty of advantages.
But when it comes to applying for a mortgage, proving your income can sometimes be a little more complicated than simply handing over a few payslips.
If you’re self-employed, a lender will typically want to understand your income and how sustainable it is.
That means your paperwork matters.
What might a lender ask for?
Depending on the lender and your circumstances, you could be asked to provide things such as:
- Your SA302 tax calculations
- Tax year overviews
- Business accounts
- Bank statements
- Evidence of your income
- Details of salary and dividends if you operate through a limited company
MoneyHelper says self-employed applicants are typically asked for two or three years of tax returns and business accounts, although requirements vary between lenders.
It’s not always as simple as “What do you earn?”
This is particularly important if you’re a company director.
For example, your income might be made up of a combination of salary and dividends, while your business may also be generating a different level of profit.
Different lenders can assess this income in different ways.
One lender might take a particular approach to salary and dividends, while another may look more closely at business profits.
So the amount you think you can borrow isn’t necessarily the same as the amount a particular lender will be prepared to offer.
Planning ahead can make a difference
If you’re thinking about moving house, remortgaging or releasing equity, it’s worth getting your paperwork in order before you need it.
This can help avoid unnecessary delays and gives you a clearer picture of what your borrowing options might look like.
It can also be particularly useful if your most recent tax year tells a different story from previous years.
For example, perhaps your income has increased significantly, your business has grown, or you’ve changed the way you pay yourself.
Having the right information available means your circumstances can be assessed properly.
Don’t leave it until you’re ready to make an offer
A mortgage is a long-term financial commitment, so it’s worth understanding your options before you start house hunting.
The right mortgage isn’t simply about finding the lowest interest rate.
It’s about finding an option that works with your circumstances, your income and your wider financial plans.
And if you’re approaching retirement, it’s particularly important to consider how a mortgage fits alongside your plans for future income and financial independence.
Self-employed and thinking about your next move?
If you’re considering moving, remortgaging or changing your borrowing, getting advice early can give you more time to understand your options.
At Jones & Co, we can help you look at the bigger financial picture rather than treating your mortgage as a decision in isolation.
Book a free discovery meeting with our Mortgage and Protection Specialist, Anya Mather: https://calendly.com/anya-mather-mortgage1st/mortgage-appointment
