It might seem that getting a mortgage as a self-employed person is complicated, and time-consuming - but the reality is that the mortgage lending market has grown vastly in the last few years, and it is now a much simpler process!
New lenders are updating their lending criteria, as more people decide to become self-employed or start up their own business.
These changes have meant less stringent application criteria and a more flexible way to secure lending, whether you are looking to invest in a buy-to-let or take out a mortgage to purchase a residential property.
Revolution Brokers has created this guide to explain how to find a buy to let mortgage as a self-employed person - and if you'd like more information or to get started with your mortgage application, get in touch!
Our team is on hand at 0330 304 3040, or you can send an enquiry to info@revolutionbrokers.co.uk.
How do buy-to-let mortgages work for self-employed applicants?
When searching for a competitive buy to let mortgage, you might hear these referred to as a self-employed BTL loan - but in actuality, this is no different from any other buy to let mortgage.
The product is the same, with the significant difference being in the calculations run by a lender since, as a self-employed person, your income will be somewhat different to a regular salary earned by an employed applicant.
Lenders will consider how much you earn, and then use averages to calculate your annual income.
Aside from this, you can apply for the same BTL mortgages as anybody else, and many flexible lenders do not stipulate a minimum income requirement.
However, it is always ideal to work with a mortgage broker who can support your application, negotiate rates and terms on your behalf, and identify the best lenders to make an application to.
Can self-employed people get buy to let mortgages?
Yes, they can. The same criteria usually apply, although a BTL mortgage is less complex for a self-employed investor since your personal income is much less critical than when a lender calculates affordability for a residential mortgage.
Investment landlords can even secure a buy to let mortgage with zero additional income; because it is the projected rental revenue that forms the essential part of the affordability process, rather than any outside income streams.
Suppose you are a new landlord and have made a profit of just £1. In that case, you can still secure a BTL mortgage as many lenders have no minimum income threshold to satisfy, and might only ask that you can prove an income - of any value.
If you are an experienced landlord, then you may not be asked to provide any evidence of your income, since your experience minimises the risk factor to the lender, who will therefore have a much lower standard of proof to satisfy.
What deposit do I need for a BTL self-employed mortgage?
In general, buy to let lenders like to have a minimum deposit of 25% on an investment mortgage. However, Revolution Brokers work with providers who are happy to accept a lower deposit of around 15%.
There are lots of ways to raise a deposit or increase the value on offer, including:
- Using savings
- Adding family gifts to your deposit
- Raising capital
- Taking out a charge on an existing rental property
If you are interested in expanding your property portfolio financed against existing equity in other rental properties, check out our guides on investment landlord mortgages.
Can I self-cert my income on a buy to let mortgage?
Some mainstream lenders may still work on old lending criteria, which means they might ask for:
- Three years of accounts
- Financial references to prove affordability
Our specialist lenders have much more flexible terms, and we are experienced in helping landlords find the right borrowing.
You can still find buy to let mortgages that are, to all intents and purposes, self-cert mortgages - although self-cert is very rare these days given reforms to mortgage lending.
Generally, the most important criteria is to demonstrate that the rental income from the property will be more than sufficient to cover the mortgage payments, which is essential from a viability perspective as well as to a mortgage lender.
How much can I borrow on a BTL mortgage as a self-employed landlord?
For buy to let mortgages, the maximum you can borrow is less focused on your income stream as an investor and more about the projected revenue from the investment property you wish to mortgage.
Typically, a lender will want to see the projected rental income, and that this covers the mortgage payments by between 125% to 145%, depending on your tax status. Many providers will ask for confirmation from a certified letting agent to support the projected rental income calculations.
Some lenders may require applicants to have a separate personal income stream, and may only consider applications from a landlord who earns at least £25,000 per year.
Do I need to prove my income to get a self-employed buy to let loan?
It depends on the lender; some mortgage providers will be happy to accept self-certification if income is not a critical affordability requirement.
However, if there are income requirements in place, then you will need to demonstrate the accuracy of your income figures.
Can I change a residential mortgage to buy to let if I am self-employed?
You can swap a self-employed residential mortgage to a buy to let mortgage, but each lender will have different eligibility requirements in place.
Usually, this takes the form of a remortgage, where a new BTL mortgage pays off the old residential mortgage and starts afresh on the new terms negotiated.
How can I get the best BTL mortgage for self-employed investors?
Mortgage products and offers change rapidly, with new promotions and competitive rates often available from niche lenders and specialist mortgage providers.
If you are looking for the most appealing BTL mortgages for self-employed investors, the first step is to contact Revolution Finance Brokers for professional advice about the ideal lenders whose eligibility criteria will match with your circumstances.
For more advice, contact the team today by calling 0330 304 3040 or sending an email to info@revolutionbrokers.co.uk.
