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Mortgage Advice If You’re Self-Employed

by Author: Jade Lloyd

Self-employed workers make up almost one in five of the UK workforce. These workers have a unique set of challenges when financing their homes. Most importantly, self-employed individuals are not eligible for mortgage loans that banks typically offer. However, there are still many options for the self-employed regarding financing a home. You need to be even more prepared than an employed person. Below is how you can best prepare yourself to apply for a self-employed mortgage.


Lower your debt ratio

A borrower’s debt ratio is a calculated ratio of the amount of debt they have versus the amount they can handle. Banks use this ratio as a critical factor in deciding whether or not to approve a loan. If you want a mortgage, your debt ratio should be as low as possible. Ideally, your debt should be under 20% of your income. The lower your debt ratio, the easier it will be to get approved for financing. The best way to lower your debt ratio is to pay off as much debt as quickly as possible. Put as much money as possible towards your high-interest debts, such as credit card payments, car loans, and personal loans. Other low-interest loans, like student loans, don’t need to be paid off immediately. Your debt-to-income ratio (DTI) is the amount of money you make versus the amount you have to make payments on, including your mortgage payments.

Get good mortgage advice.

Getting good mortgage advice is even more important for self-employed individuals than employed individuals. When a person applies for a mortgage, the bank has to assess the risk involved in making the loan. The bank does this by looking at the applicant’s credit history, income, and property value. The main difference for self-employed people is the need for the bank to conduct a more thorough investigation of their business credit history. Getting expert advice and finding the right mortgage for your circumstances, such as a cis mortgage for subcontractors, will increase the likelihood of being accepted and getting your application evaluated correctly.

Keep impeccable records

Self-employed borrowers need to keep impeccable records of their business income and expenses. Remember that banks fund a loan to your personal, not your company. Therefore, with concrete evidence of your ability to repay the loan, it will be possible to get approved for a mortgage. You will typically need 2-3 years’ worth of bank statements as proof you can afford the repayments and your self-employment is generating a reliable income.

Be careful with your spending.

The traditional path to getting a mortgage is to make as large a down payment as you can afford. However, this is even more important for self-employed individuals. This is because banks will take your personal creditworthiness into account in addition to the value of the property. Therefore, it is even more critical to have a high credit score than it would be for an employee with a steady income. On top of this, keep big-ticket purchases until after your mortgage and reduce your frivolous spending, including but not limited to gambling, eating out frequently and excessive leisure activities.


Mortgage applications for self-employed individuals can be more challenging, but it is possible. You must be prepared to provide the bank with concrete evidence of your success in the field. You can do this by keeping impeccable records, being careful with your spending, and lowering your debt ratio as much as possible.

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