Before I’d even entered into the idea of getting a mortgage with a self-employed income, I’d assumed it would be hideously hard. I’d heard loads of horror stories about how you basically had to go through 17 people, pray for a miracle and then maybe sign your soul away.
Having successfully secured a mortgage in spring 2020, I can confirm that either a) people were just exaggerating, b) things have changed a lot in recent years or c) I was just one of the lucky ones.
I thought it might help any other self-employed workers who are hoping to jump on the property ladder in the coming months and years, if I wrote up the process of how it worked, and what I needed. Just in case it makes things a little clearer. But of course – disclaimer – this is just my experience and may of course differ for other people!
Those of you who have followed my moving-house journey will know that at the beginning of 2019 my boyfriend put his house on the market so that we could up-size to something with a third bedroom.
He’d bought the house before we’d got to that ‘ready-to-live-together-now-stage’, but we ended up spending five years there together, and bringing home a second cat and a baby. We planned to buy something together, so that we could have both incomes on our mortgage.
I’ve written the full story here, but, to cut to the chase, our house purchase fell through, we decided to go ahead with the sale of my boyfriend’s house anyway, and with nowhere to live, decided to make a wild third-life-crisis decision and move 100 miles away to West Sussex where I grew up and have family.
This meant my boyfriend quit his job (and temporarily took on the full-time parent role whilst we assessed how we wanted to move forward with our lives) and we rented a nice little cottage just outside of town.
Within a week of the move back to my roots, I knew I couldn’t leave again. I reconnected with so many friends and felt closer to my family than perhaps I’d ever felt before, and the feeling of finally having that physical support network I’d spent most of my adult-life dreaming of, was too much to resist. And so we agreed to start the house hunt near the sea, but with just one income…
Getting the mortgage
The first thing we did was compare mortgages on MoneySavingExpert.com, because, well, we trusted Martin Lewis’s wise words. I know a lot of people go via a mortgage broker, but we opted to do a little research on who was offering the best mortgage rates at the time, and what would benefit us most. Which led us to Santander.
Now, you can obviously find plenty of mortgage calculators online which will help you work out how much you can afford to borrow, based on your deposit and incomes. So whilst I did these (and trust me, I did them 100 times over with different banks, just to check they all gave similar figures), I arranged a meeting – via an online booking system – with a mortgage advisor at my local branch. I was worried that being self-employed would make things a little murkier than what they seemed online and wanted to double check we could borrow what the online calculators suggested. We knew we wanted the mortgage in both our names, and ideally a five-year fixed term, with the plan that when my boyfriend went back to work, he would also be paying towards it.
Now, I’ve been self-employed for six years now, which meant that as of December 2019 when I waltzed into Santander, I had five previous tax returns. I only needed three years’ worth.
Santander based our borrowing figure purely on the most recent tax year’s net profit. I wondered if they’d take an average across all three – but they were happy to just use my most recent figure for annual income.
We then looked at how much we had for a deposit, and how much we’d ideally like to spend a month. The bank also took into account any debts, loans or outstanding credit cards we had. They then looked at all the information and calculated the top figure they could lend us.
As we’re still fairly young (hello 30), we had the option of having a fairly long mortgage, as you can usually stretch it out for however many years you have until retirement age. Of course, if you’d rather pay more each month but have a shorter mortgage, that’s an option too.
We were then able to leave with a rough idea of how much we could spend on a house. We decided not to max out how much the bank would lend us, in order to keep a bit of a safety net.
A few months later, once we had found and put an offer in on a house within our price range, I organised another meeting at the bank – this time to hopefully get a mortgage offer. This was a much longer meeting that took around 90 minutes and included me providing evidence of my past three tax returns. This is something you can easily do yourself, by printing off the info from your online self-assessment account (your mortgage advisor will explain exactly which documents you need to bring with you). Or, if you have an accountant, they can fill in a form on your behalf which verifies the figures and your income.
We also both had to provide proof of identity, and answer more questions about our financial backgrounds, previous addresses and any savings. We also had a credit check, and then when everything came back good-to-go, we were given our official offer.
From then on pretty much everything was handled between the bank and the solicitors until move-in date – we needed to do very little on our end, aside from assign a bank account for the monthly mortgage amount to come out of, and read over the mortgage documents when they arrived in the post and check that it was all OK – and it was.
In my experience, I was treated exactly the same as if I had been employed by the same company for three years – the bank simply looked at my income for the past financial year and took that as my salary. I had to provide one lot of evidence to support that (the same as you would if you were employed), and that was it.
They didn’t ask me to magically predict what my income might be over the next ten years and they didn’t ask me to breakdown my spending month-by-month and assess my hideous H&M and Just Eat spending habit. It was simple, uneventful and much easier than I had anticipated.
As I said, it’s unlikely to be exactly the same for everyone, but I had a very positive experience which wasn’t in the last bit scary, daunting or confusing!