Best Mortgage Lenders for Self-Employed Borrowers

If you’re self-employed, finding the best mortgage lender can be difficult because your situation may be unique and some lenders can’t be flexible or cater to different circumstances. Here we explore the differences between mainstream and specialist lenders for self-employed borrowers, and how to find the right one.

Do all lenders offer self-employed mortgages?

Most UK mortgage lenders will offer products specifically for self-employed borrowers, but not all will. Also, the eligibility criteria across potential lenders can vary widely. Some lenders are flexible with how self-employed income is assessed for affordability, but others may be stricter.

For example, most lenders will want to see 2 years’ accounts (sometimes even 3). Whereas others can find ways to make it work if you only have 12 months. Some lenders may also request higher deposits from self-employed borrowers with lower loan-to-value (LTV) ratios offered.

Best high street self-employed mortgage lenders

High street lenders are often a popular choice because you may be more familiar with the brands. However, these lenders are usually quite rigid in terms of their eligibility criteria and approach towards self-employed borrowers.

Here are some examples of mainstream lenders that tend to cater some mortgages and products towards the needs of people who are self-employed:

1. Nationwide

Nationwide is open to offering 95% LTV mortgages (meaning a 5% deposit) to some self-employed applicants, but the eligibility criteria is fairly strict. For example, for sole traders, Nationwide needs 2 years’ income, and they use the lower of either the most recent year’s net profit or the average of the last 2 years’ net profit.

Most self-employed applicants need to have been trading for at least two years. However, if you’re a director of a limited company that’s been established for longer than this, Nationwide will consider you if you’ve recently become a partner or own a share in the business (if supporting evidence can be provided).

2. Halifax

You’ll need at least a 10% deposit with Halifax, meaning a maximum 90% LTV for self-employed borrowers. They can be slightly flexible with how much trading history is required if, for example, you were working full-time previously and have payslips. Or, if you have a high credit score and a large deposit.

For most self-employed borrowers, you’ll need 2 years’ accounts. The income used in the affordability calculation will be the lower of either the latest year’s net profit or the average over the last 2 years. Halifax will accept income that includes Self Employed Income Support Scheme (SEISS) grants.

3. Barclays

In most cases, Barclays will want to see two full tax years’ worth of income (using SA302s from HMRC). They do offer mortgages to sole traders, contractors, and partners or directors. Barclays can be a particularly useful option for self-employed contractors and couples who own companies.

Changes made to their eligibility criteria allow brokers to calculate contractor affordability using a day rate at 90% LTV (previously 85%). They also allow multiple shareholders from the same limited company (useful for couples who own businesses) to be named on a single mortgage.

4. HSBC

Although HSBC typically requires two years of tax overviews and corresponding SA302s (or HMRC-relevant printouts) dated within the last 18 months, they might still consider self-employed applicants who have been trading for less than two years.

If this is the case, you need at least one year of finalised financial accounts (for limited companies) or one year of tax calculations and tax year overviews (for sole traders or partnerships). Then, combine this with your latest 3 months’ business bank statements (latest statement date being within 35 days of your application).

5. Santander

Previously, Santander had a 75% LTV cap for self-employed borrowers, but in recent years, they raised this to a 90% LTV maximum - meaning only 10% deposit required.

However, Santander is strict about requiring evidence of at least two years’ worth of accounts and self-employed income. It’s also worth keeping in mind that if dividends exceed net profit, the figure used for affordability can’t exceed the net profit figure - and Santander won’t accept retained profits.

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Specialist lenders for self-employed borrowers

For some borrowers, it can be a better option to approach a specialist lender because they can be more flexible when it comes to your income, trading history, and credit history. Sometimes they can even tailor their approach to your circumstances, but you often need to access these lenders through a broker.

Here are some examples of specialist mortgage lenders that can cater towards self-employed borrowers with more complex circumstances:

1. Aldermore

If you’re self-employed, Aldermore can be a useful lender to approach. You won’t be able to go direct, but a mortgage broker can arrange an introduction if they think Aldermore is suitable.

For self-employed applicants, Aldermore can use the highest combination of salary and dividends or salary and share of net profit to assess your income and affordability. And for contractors, they’re able to consider your affordability on an employed gross income basis.

2. Kensington Mortgages

Kensington is actually a subsidiary of Barclays, but unlike Barclays, they can be much more flexible with their criteria and terms. Kensington can also cater to most types of self-employed applicants, including freelancers and contractors.

Kensington only requires one year of trading history and can work off your latest year’s accounts. They offer the same rates as employed applicants and are willing to accept applicants on a debt management plan (DMP). For contractors, they calculate your income by using your current weekly contract rate and multiplying it by 48.

3. Saffron Building Society

Saffron will accept self-employed applicants with just 1 year’s accounts as long as you can provide a projection of future earnings and 1 month’s personal bank statement. They’re also open to offering interest-only mortgages provided you’ve got a repayment strategy and can manage a 70% LTV (meaning a 30% deposit).

They can consider applicants who’ve switched from sole traders to a limited company (as long as the business ownership hasn’t changed). They’re open to using either your share of the profits after taxation and a director's salary or your salary and dividends. They’ll even accept up to 90% of income from portfolio landlords.

4. Accord Mortgages

Accord requires two years’ accounts for most self-employed applicants. For affordability, they use the average of the last two years' net profits or the latest year (whichever is lower). However, they can be more flexible with contractors.

For example, they’ll allow two different contracts if you’re on a day rate. And, you only need a 6 month track record of contract work. If you’re on a fixed-term contract, they’ll want to see 12 months and if you want an LTV above 75%, you need your latest 3 payslips, but for a 75% LTV and below, you just need one payslip.

5. Vida Homeloans

If you’re self-employed with less than 2 years of accounts, Vida Homeloans might allow 1 year if you have a projection for the current year from an accountant (or 3 months’ business bank statements). Vida also offers up to a 97% LTV, with its ‘3 & Easy’ mortgages, which is pretty unique across all lenders.

For a limited company, they only accept salary plus dividends if you’ve been trading for less than 24 months. And, although retained profit can’t be used as income towards affordability, it can be used as a source of deposit.

How to choose the right lender for your self-employed mortgage

As a self-employed borrower, using a mortgage broker can help you find the best deals from mainstream lenders, or introduce you to a specialist lender for your circumstances.

Some lenders won’t let you go to them directly and require an introduction from trusted brokers like Teito. Using a mortgage broker also takes away the challenge and stress of finding the best lender yourself.

Here are just some of the benefits of choosing Teito for a self-employed mortgage:

• Access to the whole market, including exclusive deals

• The option to compare the latest self-employed rates for free

• Expert advice from highly rated, specialist brokers

• Secure a mortgage in principle in minutes

Ready to compare the latest deals and take advantage of a free, no-obligation chat with a broker who specialises in self-employed mortgages? Get started here.