Obtaining a mortgage as a self-employed individual may seem challenging, but the lending market has become significantly more accommodating in recent years, simplifying the process.
With more people becoming self-employed or starting their own businesses, lenders have adjusted their criteria to meet the rising demand from this demographic.
Whether for a buy-to-let investment or a residential property mortgage, the now less stringent application criteria provide a more flexible path for self-employed individuals and business owners to secure loans.
Below, you will find the Your Mortgage People Guide to Buy-to-Let Mortgages for the Self-Employed.
Alternatively, to speak with a qualified mortgage advisor who can offer personalised advice, give us a call at 01489 357567.
We can help with single occupancy, HMO and Multi Unit Block lending.
What’s Different About Buy-To-Let Mortgages for Self-Employed Applicants?
These products are often called self-employed Buy-To-Let mortgage loans, but they are essentially the same as any other Buy-To-Let mortgages.
The key difference lies in how the lender assesses the applicant, taking into account that their income may be more irregular compared to someone with a fixed salary.
If you’re self-employed and considering a Buy-To-Let property, lenders might pay closer attention to how much you earn, using the averages to calculate your annual income if they have a minimum requirement needed for approval.
Baring this exception, the way you apply for BTL mortgages is the same as anybody else, and the same products are usually available to you.
How Important is Income for Self- Employed Buy-To-Let Applicants?
Depending on the lender, self-employed applicants might actually find the buy-to-let process much simpler, as personal income can play a lesser role in the affordability assessment.
Investment landlords can sometimes secure a Buy-To-Let mortgage with no additional income, as projected rental revenue is the primary factor in the affordability assessment, rather than external income streams.
In this instance, providers will often request confirmation from a certified letting agent that supports the projected rental income estimations.
Typically, a lender will want to ensure the anticipated rental income covers the mortgage payments by between 120% to 145% to mitigate risk.
Alternatively, some lenders may need applicants to have a personal income stream and may only consider applications from a landlord who earns at least £25,000 per year.
Our advice is to speak to a mortgage broker who can navigate the different products and requirements on your behalf.
What Are the Requirements for a Buy-To-Let Deposit if You’re Self Employed?
Lenders typically require a minimum 25% deposit for an investment mortgage. However, whole-of-market brokers like Your Mortgage People often have access to lenders who will accept lower deposits, sometimes as low as 15%.
There are many ways to raise a deposit, including:
- Savings
- Gifts
- Capital
- Second charge on an existing property
Check out our guide to homeowner loans to find out more about how you can borrow money against an existing property.
Can You Self-Cert Your Income on a Buy to Let Mortgage?
Self-cert is increasingly uncommon these days due to reforms in mortgage lending; however, with Buy-To-Let lending, affordability with many lenders is based on the rental achieved from the property and some lenders have no minimum income requirements – just that there is some form of earnt income, be it from employment, self-employment or pension.
So, even if your provable income by way of tax calculations or accountant’s reference is low, we still may well be able to help.
Are There Buy-to-Let Joint Mortgage Options for Self-Employed Individuals?
Yes, Buy-To-Let is available in both sole and joint names of personal individuals and also through Ltd companies designed to buy and sell real estate.
The same application criteria will apply, meaning each applicant will undergo a credit check, and their combined income will be used for the affordability assessment.
However, keep in mind that the rental income from the investment property is the key factor in determining how much you can borrow.
Having multiple applicants does not necessarily increase the loan amount you can obtain.
Can You Apply for Buy-To-Let if You Already Own a Property?
Buy-To-Let mortgages can be considered by owner-occupiers of their own residential properties, as well as by those who rent, live with a partner who owns, or reside with friends or family.
If you’re looking to speak to a qualified broker before making your next move, we go beyond other so-called “experts” in the mortgage industry by providing unparalleled help, guidance and support throughout the journey – often finding solutions where others simply can’t.
Although all our advisors are CeMAP qualified, we don’t like unnecessary jargon – so our teams speak in plain English and take care to appreciate the uniqueness and demands of every enquiry we receive.
If you’re choosing the best way forward for you, we’re here to help.
Call us now on 01489 357567 or fill out a contact form to get started.
Stay tuned: If you’re the owner of a Limited Company, you may want to manage your Buy-To-Lets through your company.
We’re in the process of compiling a guide to explain how this is possible, as well as how a broker can help.
