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Self-Employed New Build Mortgage

Gary Clarke explains how the new build mortgage process works if you are self-employed.

Can I get a mortgage on a new build property if I’m self-employed?

Yes, you can. It does depend on how you’re self-employed and what your income is, but you won’t be excluded from buying a new build property if you’re self-employed.

Is it hard to get a mortgage on a new build if you’re self-employed?

That depends on your definition of hard, really. Ultimately, it still comes down to the key things of accurately assessing your income, getting a good understanding of your circumstances, and making sure we apply to the most appropriate lender. We also need to factor in a few additional criteria within the new build space.

Can I get a mortgage on a new build with only one year of self-employment?

Yes – although not every lender will do it. Most would typically want you to have at least two years. However, a number of lenders will support you with just one year’s accounts.

It’s important that you speak to your advisor so we can look at which of those lenders are available, what the costs will be, and whether you feel that it’s beneficial to go ahead straight away, or whether perhaps it’s more prudent to wait a little bit longer if we’re close to reaching two years.

My most recent years earnings were less than my average. Will this affect my new build mortgage application?

Yes. In fact, it would affect any mortgage application. Typically, if you have two, three or more years’ history and your most recent year is less than average, lenders would look to use that latest year – it’s a way of mitigating their risk.

How much can I borrow as a self-employed person?

Most lenders would offer at least four and a half times your salary, and some lenders will go up to six times.

How they calculate your salary as a self-employed person will depend on whether you are a limited company or a sole trader. If you have a limited company, your salary could be your director’s income combined with either your dividends or your share of your net profit.

If you’re a sole trader, it would be your net profit. That’s your gross income less your outgoings. And of course, as with all mortgages, your affordability is still affected by things like personal loans, car hire, outstanding credit cards, etc.

So it’s really important to get a good idea of your income and also exactly what’s going out each month. Then we can really nail down what you can borrow – and if it’s not enough at this point, we can work out a plan to get you where you need to be.

What mortgage deposit do I need if I’m self-employed?

Mortgage deposit is the same as standard – you still need a minimum of 5%. There are some schemes out there that potentially could help you with less than a 5% deposit. But for a broad picture here, then 5% is the number to be aiming for.

Every lender will treat self-employed people slightly differently – in how they assess limited companies versus sole traders, for example. So when you’re discussing your situation with your advisor it’s important that they have a really clear idea of not just your deposit amount but its source, so we can recommend an appropriate lender for you.

How will I be assessed as a self-employed mortgage applicant looking to purchase a new build property?

It depends on how you’re self-employed, and there are three main options. You’re either a sole trader, a limited company, or in a partnership.

If you’re in a partnership, typically the lender bases the borrowing on your share of the net profit from that partnership. If you’re a limited company, it’s typically more complex because they look at your director’s salary, but some lenders might also take into account your dividends, or net profit before corporation tax, or the share of net profit after corporation tax.

Lastly, a sole trader is assessed based on net profits, which is your gross income less your business expenses. Effectively, it’s the amount you pay income tax on.

How will a lender calculate my self-employed mortgage earnings? How do I prove my income?

If you have an accountant, it could be your company accounts, whether you’re a sole trader, a partnership, or a limited company.

For a limited company, typically they will want to see your company accounts to make sure the company is still trading. A lender will also want to see three months’ bank statements for the business to ensure it is still maintaining the same level of income as you’ve declared.

How can a mortgage broker help me get a new build mortgage as someone who is self-employed?

A mortgage broker is only as good as the information they’re provided with. So it’s really important that we build up a clear picture of your finances.

It’s not always about what happens today – it’s about what happens tomorrow. If we aren’t in a position to help you today, we can map out a way to get you there. Ultimately, everybody deserves the right to own a home. We want to help people get there in the least stressful way possible.