Can I get a mortgage if I’m self- employed?

Being your own boss comes with a lot of satisfaction, but it can, in some cases, make it more complicated to get a mortgage, with the mainstream banks needing you to jump through a few more hoops than the average home loan customer.

Whether you’re a sole trader, in a partnership with someone or a director of a limited company, it can be tough to know whether getting a mortgage is achievable and just how to go about it. 

We’re here to help you gain a better understanding of the process! A good mortgage advisor can help ensure your application has the best chance of success - after all, here at Clay, we’ve built our business knowing what the banks are looking for! Our experience and ability to negotiate on your behalf takes the pressure off you and can really make a difference to your home loan experience and success. 

So, self-employed and starting down the road to getting a mortgage? Here’s how we can make sure you look your best to the banks!

As with most things, first impressions count - so think of it as a job interview - you want to look successful, confident and organised! Put your best foot forward and show them how reliable and on to it you are. Next, is to come prepared with two years of financial statements which will need to include a few things:

• Balance sheet - this shows what your business’s financial position is at a moment in time (usually 31 March, the end of the tax year).

• Profit and loss, or income statement: to show the financial performance of your business for a specific period of time.

• Cash flow statement: a bit like a bank statement, this records money coming and going for a specific period of time. It provides insights into seasonal patterns and/or cash flow problems.

If you don’t have two years worth of these statements, bring what you can and we’ll see what we can do. Keep reading for more ideas on what you can provide to compliment your application and set you up for success.

If you use an accountant, statements are usually presented as a hard-copy report, so you can bring these with you. You’ll probably also receive them electronically, so they can be emailed easily to your lender. 

New Business or Start-Up?

If you’ve recently started working for yourself, things can be a little more challenging. It’s harder to prove your financial stability because your record of income-earning is short and the preferred two years worth of financial statements may not be achievable for you. If owning a home is something you’re looking to achieve, we can still chat now, give you some personalised advice and a better understanding of what kind of timeline you might be looking at.

If your business has taken off and is doing spectacularly well, you can ask an accountant to provide you with a cash flow forecast based on your business performance to date. This will show the banks how an accountant predicts your business to continue growing and might provide a little more certainty.

You could also provide a copy of contracts or agreements you have with key customers as another form of proof of income to show stability and your commitment to keep trading and growing. 

Still employed?

If you are currently toying with the idea of working for yourself and are looking to apply for a mortgage in the near future, it might be in your best interests to continue with your employment. It’s usually better to apply for a home loan while you are still employed by someone else - as the banks number one goal is to make sure you have steady income and can make your payments consistently for the foreseeable future. The more reliable and consistent your finances are, the better! 

If you’re looking for more personalised advice or are just wanting to chat about your options or the way forward, you can contact us here!