Joint Mortgage Applications when One is Self Employed

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Can you get a joint mortgage if one applicant is Self-Employed?

First of all, it’s important to point out that a self-employed mortgage does not exist. The vast majority of mortgage products on the market are available to both employed and self-employed mortgage applicants.

A self-employed person will usually need to satisfy additional criteria compared to an employed applicant and how you prove your income is different. As the mortgage itself is not based on your job type, however, applicants with different job types can be considered on the same application.

Those mortgage applications with just one self-employed applicant, as opposed to both applicants being self-employed, are actually more likely to be accepted. This can even be the case if the employed applicant earns slightly less than the self-employed applicant. A stable and permanent income is often looked upon more favourably than a fluctuating one.

How much can you borrow if one applicant is Self-Employed?

Whilst the calculation may be slightly more complex for the lender in this case, it should not affect how much you are entitled to. The loan amount will be based on a multiple of your overall joint income. Whether or not you are jointly able to cover the repayments on your mortgage is the lender’s main concern.

How you prove your income will be the only thing that differs between the employed applicant and the self-employed applicant.

As the employed applicant will usually be looked upon more favourably in terms of risk, it may be worth putting their name as the lead applicant on the application.

Remember that the credit score of both applicants will also be considered during the application process. If one applicant has bad credit, regardless of their employment type, you will need to consider how much risk this adds to your application. Mortgage advisors will be able to help you decide how much of an impact your credit record will have on your application.

What documents do you need if one applicant is Self-Employed?

The information lenders require if you’re self-employed, will depend on the type of business you are operating.

Sole Trader, Contractor or Partner

If you are a sole trader or contractor, the mortgage lender will need to see your finalised accounts or SA302 form for the past three tax years. It is possible to find specialist lenders who will accept just one year’s worth of accounts, however this is less common.

If you are a partner of a company, it’s worth noting that, whilst the same evidence will be required, only your percentage share of the profits will be considered in the loan calculation. You must own at least 25% share of the company to be classed as self-employed for this purpose.

Limited Company

If you run a limited company as a director, your salary and dividends payments will be used to calculate your income and therefore your payslips will be used as evidence.

It is possible to find lenders who will also consider your business profits alongside your personal income. In this case you will need to provide your SA302 as well as your payslips.

Does a mortgage have to be in joint names?

Your mortgage does not have to be in joint names, in fact, in some circumstances, it may be easier to apply for the mortgage in a single name. For example, if the self-employed applicant has less than one year’s accounts available, they are unlikely to be accepted.

If the employed applicant has a high enough income on their own, it is possible to apply for the mortgage in a single name. You should bear in mind, however, that the loan amount is likely to be smaller. It may therefore be worth waiting until the self-employed applicant has a longer trading history, prior to application.

How can a Mortgage Broker help if one applicant is Self-Employed?

Mortgage Brokers, especially those with experience of helping self-employed applicants, will be best placed to advise you about your mortgage options. They will know which lenders will consider and are most likely to accept self-employed applicants.

A Mortgage Broker will also be able to advise you whether it would benefit you to use the employed applicant as the lead applicant, based on your individual circumstances. They can also advise whether you may be best applying in just one name.

Lastly, a Mortgage Broker has the advantage of access to deals that you may not be able to find on your own. This could not only give you more chance of acceptance, but better interest rates than you have found elsewhere.