Mortgages for all types of self-employed
Our standard self-employed policy is detailed below. For criteria relating to contractors, please follow the links at the bottom of the page.
Your clients affordability is assessed against their latest two years income figures and underwritten against 100% of salary and dividend.
Affordability is assessed against an average of their last two years net profit. SA302’s with associated tax year overview are required to support the application.
A current year's projection from a suitably qualified accountant may also be considered as part of our underwriting assessment subject to the following conditions:
- Two years previous accounts being available;
- Accountant projection is based on minimum 6 months year to date management accounts; and
- Income is then calculated against the average of the two full years and the current year end projection.
A three year average may also be applied to offset a reduction. Cases are considered on an individual basis provided that a satisfactory explanation can be given for any decline and an accountants projection is available to support the application.
Your client has been trading for four years and has the following income for the previous three years £30,000 in year 1, £40,000 in year 2 and £50,000 in year 3. The allowable income for mortgage purposes would be an average of years 2 and 3 - £90,000 / 2 = £45,000
Example 2 (incorporating a projection)
Your clients income for the last two years has been confirmed as £20,000 for year 1 and £25,000 for year 2. You client has an accountants projection for the current year end, based on 6 months management accounts of £30,000. The allowable income is an average of the three years - £75,000 / 3 = £25,000
Example 3 (One off reduction)
Your client has been trading for a number of years and has income history for the previous three years showing £55,000 in year 1, a drop in income to £35,000 in year 2 and a subsequent increase back to £55,000 in year 3. Their accountant has provided a satisfactory explanation for the decline in year 2 and confirmed that current income levels were sustainable. Allowable income for our mortgage purposes would be calculated against a three year average - £145,000 / 3 = £48,333
For criteria relating to contractors, please follow the links below.