Joint Mortgage One Self-Employed
Can you get a joint mortgage if one applicant is Self-Employed?
It’s perfectly possible to obtain a joint mortgage where one of the applicants is Self-Employed and the other is, for example, more traditionally employed. When you apply jointly for a mortgage with another person, the mortgage product will not change based on your job types, whether you are both employed, both, Self-Employed, or one of each.
From a borrower’s perspective, the only thing that will differ, depending on the nature of your employment type, is how you prove your income. So if one applicant is Self-Employed, they are simply going to need to provide evidence of a longer working history than their PAYE partner.
Mortgage Lenders consider Self-Employed income to be less stable, and therefore more of a risk than PAYE income, which is why they will ask for additional proof of earnings. The standard requirement for a PAYE mortgage applicant is three months worth of payslips and bank statements, whereas Self-Employed applicants will need to prove that they have had a consistently stable income for a longer duration, typically two to three years, depending on the lender.
How much can you borrow if one applicant is Self-Employed?
When calculating your joint loan, the main goal of the Mortgage Lender will be to be confident that between you, you can afford the repayments on your mortgage, in the long term. They will assess your joint affordability and both of your credit histories.
For a Standard Residential Mortgage you can expect to borrow between three and five times your combined annual income. It’s worth noting, however, that Self-Employed income is calculated differently than PAYE income by the lender. To mitigate some of the perceived risk in lending to Self-Employed borrowers, their income is averaged out over the lender’s defined period of two to three years.
What documents do you need if one applicant is Self-Employed
In order to establish an average income for Self-Employed applicants, lenders will ask for documentation to prove their income over their defined period, which is usually two to three years, although some niche lenders will consider those with a twelve month trading history, in some circumstances.
The specific proof of income necessary will depend on the type of Self-Employed business that you operate, as per the below:
Sole Traders or Freelance workers have a fairly straightforward requirement, given that they only have to prove their personal annual income, SA302 tax returns for the two to three years preceding your application will usually suffice, although lender requirements can vary slightly.
As a Contractor, you may work similarly to a sole trader, or on a constant day-rate. There are lenders who are willing to consider an annualised version of your day-rate to form the basis of their loan calculation. In this instance, it’s likely that they will require written contracts confirming ongoing working agreements, on top of your SA302s.
Lenders use an average of the combined personal salary and dividends over the relevant number of years, to determine a loan for Limited company Directors. Some more specialist lenders, however, may also be willing to consider your net business profits.
It’s important to know that as a partner, you must own at least 25% of the business in order for your income to be counted in support of a mortgage application. The lender will look at your share of the net profits.
In either case, the evidence of income is more exhaustive in the case of business owners, and you should have the following available:
- Two to three years of certified accounts
- SA302 forms for the same duration
- Business bank statements
- In some cases, estimated future income and business plans are also required
Does a mortgage have to be in joint names?
It’s perfectly possible to buy a property as a couple, with both names on the deeds, but only one name on the mortgage. It’s important, however, to bear in mind that a joint application would result in a higher mortgage offer.
How can a Mortgage Broker help if one applicant is Self-Employed?
Here at First Step, our Mortgage Brokers specialise in helping Self-Employed people to buy the house of their dreams, whether that be jointly with a partner, or individually. We have access to deals that are not available on the high street, and can save you the hassle of seeking out the most suitable mortgage deal for your specific circumstances.
If you’re applying as joint applicants who have different employment types, we can help you to prepare in advance, as our in-depth knowledge of lender criterias means we can ensure you approach the right lender to achieve a successful outcome.
Your home may be repossessed if you do not keep up repayments on a mortgage