You will be classed as self-employed if you own around about 25 percent of a business or more. Those who are in a partnership are treated the same as those who are sole traders.
Most lenders are happy to give mortgages to self-employed people who have been trading for at least three years and have two years of accounts or self-assessment tax returns available.
There are always exceptions to this rule such as the odd lender who might consider one year plus a projection but these are in the minority.
Some particularly strict lenders might want to see a prediction of your future clients or contracts to make sure that you will be able to afford repayments ongoing.
When lenders determine how much to lend to you, they generally base their calculations on your average profit in the past few years. Lenders prefer borrowers to employ an accountant to prepare self-employed profit and loss accounts. Some lenders state the accountant must be certified or chartered – so bear this in mind when choosing one.
In order to prove your income, you will need to be able to provide your lender with at least two years of accounts. Get these put together by a chartered accountant so your lender can be confident they are accurate. There are a couple of common problems you may come up against when proving your income. Firstly, in the past you and your accountant probably have been keen to legally reduce taxable income in order to pay less tax. However, this could count against you when applying for a mortgage as suddenly you need to show the biggest income possible.