You may have heard the phrase ‘it’s difficult to get a mortgage if you’re self-employed.’ This is simply not true. It is true that your income is assessed in a variety of ways, depending on the lender as well as the type of self-employment bracket you fall into.
Being self-employed it is crucial to take expert advice from a knowledgeable mortgage broker to obtain correct and accurate advice. There are a whole host of areas to explore;
- How many years accounts do I need?
- Is it a problem that I leave cash reserves in the business?
- What documents do I need?
Different types of Self-Employment:
Ltd Company Director
You will generally be considered self-employed if your shareholding in the Ltd company is greater than 20%. As a director in a Ltd company most mortgage lenders will base your income on your director’s salary and dividends.
There are also lenders who are able to use your share of net profits plus your director’s salary. This can be advantageous to those who retain profits in their company rather than drawing down all of the company’s available income. We have assisted clients who have been told they can borrow a fraction of what we have obtained for them based on this knowledge alone.
The majority of Lender’s will regard your income as your net profits. I.e. Income after expenses for which you pay tax on.
Similarly to sole traders, lender’s will ask for your share of net profits.
As a specialist in contractor mortgages we have extensive experience in placing self-employed daily rate contractors.
Assessed in different ways either; salary & dividends, your share of net profits or your daily rate annualised to a paye equivalent. E.g. Day rate of £400 x 5 x 48 weeks = £96,000 annual equivalent.
Hawk Mortgages are experts and experienced in dealing with all different types of self-employment.
Do you need help? Fill out this form to get in touch.