Three self-employed mortgage myths that are costing you

We speak to self-employed borrowers every week who have been told things about mortgages that are simply not true - usually by a high-street lender that does not understand non-standard income. Here are the three myths costing self-employed borrowers the most.

Myth 1: You need three years of accounts

Plenty of lenders accept one year of accounts, especially if you have a track record in the same industry before going self-employed. Some will even look at retained profit and contract value, not just the bottom line. If a lender has told you to come back in two years, they are not the right lender.

Myth 2: CIS contractors must use self-employed accounts

CIS (Construction Industry Scheme) contractors can sometimes be assessed on gross contract value, not self-employed net profit. This is a significant advantage - a contractor earning £50,000 gross might show far less on self-employed accounts after expenses, but a lender using contract value sees the full £50,000. We know which lenders treat CIS this way.

Myth 3: A low salary means you cannot borrow

Limited company directors often take a low salary (around £12,000) and the rest as dividends, for tax efficiency. Many high-street lenders assess on salary plus dividends only - which caps borrowing. But several building societies assess on salary plus dividends plus your share of net profit, including retained profit. For a director on a low salary with high retained profit, this can add tens of thousands to the borrowing ceiling.

The honest Take

Being self-employed does not mean a worse mortgage. It means you need a broker who knows which lender uses which income calculation - because the difference between lenders, for the same person, can be £100,000 of borrowing power. Bring your accounts, your SA302s, your CIS vouchers, or your contract - we will match you to the lender that uses the most favourable figure for your situation.