As a sole trader, you'd be forgiven for thinking that finding the right mortgage deal is trickier than navigating your way out of Hampton Court Maze.
If you're feeling confused or stressed about the whole thing, relax. We've put together this handy guide to answer all your most common questions about sole trader mortgages.
And when you're ready, we'll guide you through each step of the mortgage process, source the best possible deal for your circumstances, and ensure your application is presented to lenders in the best possible light.
Oh, and we can save you a ton of time and hassle to boot.
- What mortgage deals are available to sole traders?
- How much deposit will I need to find?
- How much can I borrow?
- How many years books will I need?
- What income criteria do lenders use for sole traders?
- Can I get a sole trader mortgage with bad credit?
- Mortgage affordability explained
- How to improve your chances of getting a sole trader mortgage
- What docs will I need to provide the lender?
- Get a sole trader mortgage quote
What mortgage deals are available to sole traders?
Sole traders have access to the same mainstream mortgage rates, deals and lenders that are available to other types of borrower, such as employees and company directors for example.
Whilst a small number of lenders do have their own dedicated ranges of self-employed mortgage products, most providers don't differentiate at all.
How much deposit will I need to find?
Many mortgage providers will consider lending at 95% loan to value, subject to qualification. So it's entirely possible to buy a property with just a 5% deposit.
For the highest LTV deals, many mortgage companies require two or more years business accounts, finalised and submitted to HMRC. But a few are happy to consider just one year's books, subject to a credit check and affordability assessment.
The simple rule of thumb for LTV's is: the higher the deposit, the lower the mortgage interest rate you'll pay.
LTVs for leasehold property
The type of property you are buying will also affect the maximum LTV available. For example, mortgage providers consider flats and other forms of leasehold property, as inherently riskier security than houses. To compensate, banks and building societies usually require a larger deposit of 15-20%.
How much can I borrow?
Sole traders can typically borrow around 4.5 times single or joint income. Your income is assessed on your net profit declared in your annual self-assessment tax return. In other words, the amount of profit your business made that you paid income tax on.
For a joint application where one partner is employed, gross employed income before tax is added to the sole trader's net profit income to work out the maximum borrowing amount.