How much can a self-employed professional borrow?
Usually between five and six times income. Though currently, it is possible to borrow at a 6.5 Loan-to-Income (LTI) multiplier with one lender.
By comparison, non-professional self-employed borrowers are generally restricted to 4.5-4.75 LTI.
How is professional income assessed?
How your income is assessed depends on whether you're a limited company director, LLP equity partner or contractor.
Here's more info on each of them...
Limited company directors
Allowable income is calculated in one of there ways for limited company directors:
- Salary and dividends. Either an average of the last two years or the latest year
- Salary and net profit after corporation tax. Some lenders use the latest year's figures, others average the last two.
- Salary and pre-tax net profit. Nearly always an average of the last two year's numbers.
To use options 2 or 3, a minimum 50% company shareholding is often required. For more information see our limited company directors mortgage guide.
Equity Partners in a LLP
Equity partners in a Limited Liability Partnership are assessed in one of two ways:
- Using the partner's share of net profit after tax, as evidenced by the LLP's finalised accounts.
- The partner's income as evidenced by their annual tax calculations/SA302s.
Our Mortgage Guide for LLP Partners has more information on how LLP member's income and affordability is assessed.
Contractors
If you're a contractor, we have a number of mortgage guides including for limited company contractors and umbrella contractors.
What other factors affect how much I can borrow?
Your maximum borrowing amount is dependent on several factors including:
- Your income
- Your age
- Deposit size
- Whether you have any financial dependents (children or elderly relatives)
- Debts:
- Ongoing financial commitments
- The mortgage term
- The concessionary period. For example, a five-year fix can often allow greater borrowing than a two-year fix
As you can see, income is no longer the sole criteria for affordability.
Ongoing financial commitments
Nowadays, all providers have to take your personal circumstances into account, including committed expenditure for things like spousal support, child maintenance, tuition fees and so on.
As you might expect, debts such as credit card balances (unless they're cleared monthly), unsecured loans, overdrafts, or personal car finance are also looked at closely.
The monthly payments, size of the debts and duration of the loan will all affect how much you can borrow.
Joint applications where one applicant isn't a professional
For a joint application, the 'standard' income multiple of 4-4.5 x income is commonly applied to an employed or non-professional self-employed.
Here's an example...
Jenny is a self-employed solicitor with a 50% equity share in a Limited Liability partnership (LLP). Her net profit share is £87000 in the latest year which some lenders will base their calculations off.
Her civil partner Kerry is employed full-time in a local government senior finance role, earning £62000 p.a.
The lender for the mortgage product sourced allows 5.5 x income on professional income, and 4.5 x income for other roles. Note that whilst Kerry works in finance, her role does not meet the lender's specific definition to qualify as a 'professional'.
The maximum borrowing amount, subject to affordility assessment, is calculated like so:
- 5.5 x £87000 = £487500
- 4.5 x £62000 = £279000
- Maximum borrowing = £766500
What are the eligibility criteria
Due to the higher borrowing available, applicants must meet strict eligibility criteria.
You'll often need a minimum income of £30,000 to £50,000 and a good credit history.
Regardless of whether you have a limited company or Limited Liability Partnership, most lenders require two years or more trading history with HMRC submitted accounts or tax calculations.
The bank or building society may also specify a maximum age at application. Typically borrower's must be no older than 35 or 40 years old.
What documents do I need to provide?
The documents required to evidence your income and expenditure vary between lenders. Our handy self-employed document checklist has more details.
Mortgage advice for self-employed professionals
Getting a self-employed professional mortgage doesn't need to be difficult. Our mission at SEMH is to help self-employed borrowers buy their home or investment property as quickly and smoothly as possible.
And with the most suitable pound-for-pound mortgage deal for your circumstances.
We're independent, whole-of-market and serve entrepreneurs, company directors, LLP partners and contractors nationwide.
To get started, first tell us about what you're looking to do.
Our simple quiz takes about 2 minutes to complete and you'll also be able to schedule a 15 minute call to discuss your case in more detail with an adviser.
Of if you prefer, call us on 0117 205 0655 during our office hours of 9am to 5pm Monday to Friday. There's no call center or queueing. You'll speak to an adviser direct.
We look forward to finding you a great mortgage deal.
