The benefits and risks of a UK self employed mortgage

A UK self employed mortgage is ideal for someone such as a sole trader, partner, or owner of a Limited company, who has unpredictable earnings compared to a salaried employee. The lender will ask to see typically the last three years business accounts to establish the average income levels of the business owner and assess the business for the ability for the borrower to pay for the mortgage in the future. Other terms of a UK self employed mortgage will depend upon the lender’s requirement at the time, and in accord with the interest rates prevailing in the market.

benefits

You can obtain a mortgage based on the ability of your business to provide you with an income, even if this income varies a little from one year to the next.

If you expect your income from your business to rise in the near future, and are confident that you can maintain the monthly mortgage payments, you may be able to acquire a better property than your current business accounts show, if the lender is prepared to take future business growth into account.

risks

If your business is hit by an unforeseen event which damages your future estimated profits, your ability to trade, or puts you out of business completely, you may not be able to maintain your mortgage payments, and your home will be at risk.

With a UK self employed mortgage you are unlikely to get more than 75% of the property price advanced from a lender (simply because of the higher risks involved) therefore you need to be able to finance the remaining 25% from other sources.

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