Published 21st March 2018 · Updated 26th September 2023 by Martin Alexander
Being self-employed certainly has its benefits but can make getting a mortgage difficult. The good news is that some lenders have developed a more relaxed approach to lending to the self-employed. This is especially true where buy-to-let mortgages are concerned.
Around 4.24 million self-employed workers are living in the UK, and as a result, many lenders consider self-employed applicants. For this reason, self-employed buy-to-let mortgages aren’t as difficult as applicants seem to think. A structured approach to your mortgage can even secure great mortgage rates.
As lenders have varied criteria, some may request a minimum income or accounts for three years. On the other hand, some lenders will approve mortgages with:
- Only one year of accounts
- No minimum income requirement
- Zero income for experienced landlords
Can I get a buy-to-let mortgage when self-employed?
Buy-to-let mortgages are possible for the self-employed. Lenders with zero income requirements are typically better suited for directors and sole traders. This is because your income may be tied up within the business.
Even if a self-employed applicant showed just £100 profit on their accounts, lenders will view this as an income. As some lenders have no minimum income requirement, this won’t be an issue. Furthermore, if you’ve already owned buy-to-let property, lenders will view you as a smaller risk compared to less experienced borrowers. This means that experienced landlords can obtain buy-to-let mortgages without having an income.
Lenders agree because rent usually covers mortgage payments and leaves the landlord a monthly profit. As a result, lenders don’t need to depend on an applicant’s income to repay the mortgage. As most buy-to-let mortgages are taken out on interest-only rates, monthly mortgage payments can be very low.
How do buy to let lenders assess self-employed applicants?
Self-employed applicants are almost always assessed on a case-by-case basis. This is because each self-employed applicant will have unique circumstances. Nonetheless, if your income and accounts are clearly presented, getting a buy-to-let mortgage shouldn’t be a problem. This is especially true if you’ve approached a suitable lender from the start.
Buy to let lenders assess self-employed applicants in the following way:
- Income assessment – Although lenders will be more interested in the property’s rental income, showing a healthy business profit can boost your application. Lenders with zero income requirements will be better suited for those with low income on their accounts.
- Rental value – The most important aspect of your application will be the rental value of the property you purchase. This is because it can show lenders that your rental income alone is enough to repay the mortgage. As a result, aim for your rental income to be at least 125% of the mortgage repayments. Some lenders will require the monthly rental income to be 145% of the monthly mortgage.
- Business type – Lenders will assess the type of business you own. For instance, directors will be assessed differently from sole traders and freelancers. Depending on the nature of your business type, you’ll need to approach suitable lenders. This is because certain lenders will be better suited for directors, whereas others will be more suited to sole traders.
- Deposit amount – In almost all cases, you’ll need at least a 25% deposit. This is because buy-to-let deals often start at 75% LTV. Lenders may sometimes accept slightly lower deposits of 15-20%, but it isn’t advised. Using a higher deposit will typically secure favourable rates.
- Landlord experience – If you’re a first-time landlord, don’t panic! Every landlord has to begin somewhere, and lenders understand this. That being said, having a proven track record as a landlord can certainly improve your application. This can be crucial when you’re self-employed, especially if you show a low business income.
Are there buy-to-let mortgages for self-employed applicants?
There aren’t any particular buy-to-let mortgages for the self-employed. The same mortgages are offered to buy to let applicants, irrespective of how they’re employed.
Although there aren’t any differences in the mortgage products being offered, there are certainly differences in how self-employed applicants are assessed. Lenders are typically more cautious when assessing self-employed borrowers in comparison to the employed. This is because of the potential risk of being a business owner.
The good news is that there are lenders more suitable for self-employed applicants. Some lenders have no minimum requirements, which can make mortgage approval easier.
How to get a buy-to-let mortgage when you’re self-employed
Before approaching a mortgage lender, speak to an expert to ensure your application is ready. We rarely recommend approaching a mortgage lender randomly, as they might not suit your circumstances. This is especially true if you’re self-employed. An advisor can help you with the following:
- Ensure your accounts are in order – Whether you file company accounts or a self-assessment, your lender will request your income documents. Providing income documents for three years will strengthen your application, but it is still possible with accounts for one year.
- Check your buy-to-let property – Assessing the rental value of your property is highly recommended. This ensures you’re buying a suitable investment to generate enough rental income to repay your buy-to-let mortgage.
- Check if you’re eligible – Each lender has varied criteria, so you’ll need to check with your advisor if it’s likely that you’ll be accepted for a mortgage. This can involve assessments on whether the rental value is high enough to cover the mortgage and whether your circumstances meet the eligibility for a mortgage.
Can I remortgage a buy to let if I’m self-employed?
Yes, self-employed borrowers can remortgage a buy-to-let property. It’s easier to switch deals with your existing lender, but you’ll have to undergo an assessment if you want to switch lenders completely. The assessment will be similar to when you first applied for a mortgage. That being said, it can be worth doing if another lender has a great deal that you simply can’t miss.
The process should be straightforward if you were self-employed when you initially got your buy-to-let mortgage. Furthermore, if your income hasn’t changed much since you were approved, you shouldn’t have any significant problems. In comparison, if you were previously employed or the income from your business has reduced significantly, you’ll need to approach lenders with caution.
Even if the income you earn from your business is low, it’s still possible to remortgage a buy-to-let. This is because lenders will assess your repayment history since you’ve had the buy to let. Furthermore, if the rental income can repay the mortgage, it can compensate for a low business income.
Read more: How to remortgage a buy to let
How much can I borrow if I’m self-employed?
Buy-to-let lenders rarely use business income to assess how much applicants can borrow. Instead, lenders will assess the rental income your property can generate. That being said, having a secure income can still improve your mortgage chances.
Lenders will require details of your buy-to-let, such as the rental income it can achieve. This is because the rental income will need to be between 125% – 145% of the mortgage payments. Some lenders will send their surveyors to check rental values, whereas others will use valuations from ARLA-qualified letting agents.
Use our self-employed calculator here.
Can mortgage advisors help self-employed applicants?
Our expert mortgage advisors specialise in mortgages for the self-employed. Here are a few reasons to contact us!
- Access to the whole market – Our advisors aren’t tied to one lender, meaning they’ll search the entire market for a product that suits you.
- Exclusive products – Our experts have access to exclusive mortgage products that may not be available elsewhere.
- Independent – Our advisors will always do what’s best for you, as they are not tied to certain products and companies.
- Experienced advisors – Our specialists are all professional, qualified, and knowledgeable on self-employed buy-to-let mortgages.
- Specialist advisors – With expert knowledge in fields such as self-employed mortgages and bad credit mortgages. Even when a mortgage seems unlikely, our advisors can often locate approval.
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About the author
Martin Alexander
Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.