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Buy to let mortgages for self employed
Self employed people are able to get buy to let mortgages, much like an employed person.
Buy to let mortgage lenders all have their own individual criteria, so the self employed applicant would need to meet this to be offered a mortgage.
The way that buy to let lenders treat the income of a self employed person will vary from lender to lender.
For instance, if the self-employed applicant runs a limited company paying themselves a salary and dividends, some lenders would use this to calculate their total income.
Other buy to let lenders have a different stance, and would use a total of the applicant’s director’s remuneration and their share of the company profits after corporation tax.
This is significant because if the lender has a minimum income criteria that needs to be met to be offered the buy to let mortgage, the difference in the calculation may mean that the mortgage is outside of criteria.
For example, many lenders have a minimum income criteria of £25,000 to qualify for lending.
This figure varies across the different lenders, with some not having a minimum income criteria. Some lenders have a minimum income criteria for a portfolio landlord, but not with standard applications for people with less than four mortgage properties.
When you talk to a mortgage adviser to find out your options, they will want to understand your dividend income and your company’s net profits.
This would enable them to determine how different lenders will view your income and which buy to let lenders be available to you in your situation.
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Are interest rates on a buy to let mortgage for self employed people the same as for employed people?
Lenders would not usually charge a premium for lending to a self-employed person.
Lenders will offer their mortgage products to applicants that meet their lending criteria as long as they are comfortable with the application.
However, in circumstances where self-employed income takes you outside the criteria for the lenders you wish to use, this may mean needing to change lenders.
For example, with a lender offering the most competitive interest rate potentially requiring two years self employed history, and you only had one year, this would take you outside of the criteria on this lender.
As a result, you would need to move lenders to find a mortgage where you meet the lender criteria, which could result in a more expensive product.
It would help if you talked to an experienced mortgage adviser to determine which lenders would be most suitable for you based on your income.
How many years of accounts are needed for a buy to let mortgage for self employment?
The amount of trading history a self-employed person needs to meet the lender’s criteria will vary.
This is because all lenders are required to qualify for one of their products.
For instance, some lenders will need you to have been trading for two years before accepting your income for a buy to let mortgage application.
This would mean providing two years’ worth of accounts or documents from HMRC, such as tax calculations and tax year overview statements.
Other lenders do not need two years and are happy to work from one years worth of trading history.
Some lenders have no minimum income criteria and can even consider self employed applicants for buy-to-let mortgages, which have only just begun trading.
They will still need an understanding of what you are doing for a living and why you cannot provide income verification at this time. Still, if they are comfortable with the situation, some will be able to offer a mortgage.
The amount of rental income property will generate for buy to let mortgage applications is significant.
Although buy to let lenders want an idea of an applicant’s personal income, the rental amount is often the figure that dictates the maximum loan available. This is known as the lender’s stress test.
With lenders having different stress tests and different income criteria, it is strongly recommended that you look for a mortgage adviser with buy to let experience to recommend a lender accordingly.
Buy to let mortgage for self employed people with bad credit.
It is still possible for self employed people with bad credit to get a buy to let mortgage.
Not all buy to let lenders will offer a mortgage to an applicant with bad credit, as some require you to have a clean credit history to qualify for one of their products.
There are. However, some buy to let mortgage lenders specialise in applicants who have previously encountered credit issues.
There are many different examples of bad credit, so it is important that you tell your mortgage adviser what yours consists of so they know which lenders they can approach.
For instance, self-employed bad credit can mean bankruptcies, debt management plans, IVAs, CCJs, arrears, defaults, payday loans and more.
With a wide range of different credit examples that could negatively affect your application, finding a mortgage adviser with experience in adverse credit and buy to let mortgages would be recommended. If you want more details about your credit history, you can go to Check My File to sign up for a free trial.
Do you need a specialist mortgage broker for a buy to let mortgage for self employed people?
If you are looking for a buy to let mortgage as a self employed person, you do not necessarily need a specialist mortgage broker.
The reason is that lenders are happy to consider self employed applicants as long as they meet the lender’s criteria.
If the mortgage is more complex, it may be that you need a specialist lender.
A mortgage adviser would be able to guide you around which lenders are available to you.
It would be best to ask your mortgage adviser whether they have experience arranging similar transactions.
Some mortgage advisers specialise in different areas, so finding a broker that arranges many mortgages for self employed buy to let applicants are recommended.
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Conclusion
It is undoubtedly possible for self employed people to get buy to let mortgages.
Depending on the amount of trading history that an applicant has and their level of income, this would affect which lender is recommended by a mortgage adviser.
Some buy to let mortgage lenders need an applicant to have 2-years’ trading experience whereas others do not need any set time.
The buy to let mortgage market is complex, with many different lenders available.
As a result, it is recommended that you find a mortgage adviser with plenty of experience in arranging buy to let mortgages for self employed people.
Most mortgage advisers will be willing to give you a free consultation so that you understand your options.
If you would like I NEED ADVICE to match you with an experienced, qualified mortgage adviser. Please complete the contact form.
The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
