Self Employed Mortgages in Leicester
Self Employed Mortgages in Leicester
Why Leicester has so many self employed applicants
Leicestershire's economy produces a lot of people who do not have a simple monthly payslip.
The county sits at the centre of the UK's logistics network — Magna Park at Lutterworth and the corridors along the M1 and M69 support large numbers of owner-drivers, hauliers and subcontractors. Leicester's long-established textile and garment trade still operates on small businesses and sole traders. Construction, private hire, IT contracting, food production and the professional services around the city add to it.
The result is a large population of perfectly creditworthy people whose income arrives in a form high street automated systems handle badly.
How lenders assess self employed income
This is where cases are won or lost.
Sole traders
Assessed on net profit, taken from your SA302 tax calculations. Most lenders average the last two years; some use the most recent year if it is higher; a few use the lowest year. That single policy difference can shift borrowing by tens of thousands.
Limited company directors
The largest variation of all. Many lenders use salary plus dividends drawn. A smaller and very valuable group use salary plus your share of retained net profit — the money left in the business. Directors who deliberately leave profit in the company to manage tax are often assessed as though they earn far less than they do, unless we place them with a lender that looks at the whole picture.
Contractors on a day rate
Several lenders will assess you on your contract rather than your accounts, typically day rate × 5 × 46 to 48 weeks. This frequently produces a much larger figure than accounts-based assessment, and it applies to a lot of the engineering, IT and construction contractors working across the county.
Partnerships
Assessed on your share of net profit.
Newly self employed
Most lenders want two or three years. A useful minority will consider one year's accounts, especially where you were employed in the same trade immediately beforehand. Rates are typically a little higher.
What you will need
Getting the SA302 and the tax year overview to match is the most common practical snag. They must correspond exactly, and the tax must have been submitted and, in most cases, paid.
- Two to three years of finalised accounts, or SA302s with matching tax year overviews
- Three months of business and personal bank statements
- Evidence of ongoing work — contracts, a booked pipeline, recent invoices
- Proof of deposit and its source
- Your accountant's details; lenders often contact them directly
If your figures have dipped
A drop in profit does not end the application, but it changes the strategy.
Lenders that average two years will produce a lower figure. Lenders that use the latest year will produce a lower figure still. Lenders that consider the trend, with a written explanation from your accountant setting out why — a one-off investment, a lost contract since replaced, a deliberate reinvestment in the business — will often take a more reasonable view.
Bring us the numbers early, including the bad ones. We would far rather plan around a difficult year than discover it at underwriting.
Timing matters more than people realise
Two practical points that regularly save money:
Your accounting year end. If your most recent year is your strongest, applying shortly after those accounts are finalised captures the higher figure. If your current year is trading better, waiting a few months for it to be finalised may be worth considerably more than any rate difference.
Do not restructure your drawings just before applying. Directors sometimes increase dividends to look better on paper. Lenders check consistency against the business accounts, and a sudden change immediately before an application invites scrutiny rather than approval.
Lenders that work for the self employed
Alongside the high street, our panel includes lenders that specialise in complex income — Kensington Mortgages, Pepper Money and Precise Mortgages among them. These lenders will consider one year's accounts, retained profit, day rates and recent changes in trading in a way most mainstream banks will not.
Where a high street lender will take your case, we will usually place it there, because the rate is better. The specialists exist for when they will not.
Speak to a Leicester self employed mortgage adviser
Bring your last two years of figures and we will tell you what is realistically achievable — and which lender will get you there.
Call 0116 277 7536 or book a free consultation.
Cedar House, 3 Broad Street, Enderby, Leicester, LE19 4AA.
Common questions
Can I get a mortgage in Leicester with only one year's accounts?
Yes, with the right lender. Most want two or three years, but a meaningful number will consider a single year's figures, particularly where you worked in the same field as an employee beforehand. The rate is usually a little higher, and evidence of continuing work matters.
How do lenders work out my income if I am a company director?
It varies more than any other part of self employed lending. Some lenders use salary plus dividends. Others use salary plus your share of retained net profit, which often produces a much larger figure for directors who leave profit in the business. Choosing the right lender here can change your borrowing substantially.
What documents will I need?
Typically two to three years of finalised accounts or SA302 tax calculations with matching tax year overviews, three months of business and personal bank statements, and proof of ongoing work such as contracts or invoices. We tell you exactly what your chosen lender wants before we apply.
Does a recent drop in profit stop me getting a mortgage?
Not necessarily, but it changes the approach. Many lenders take the lower of your most recent year or an average, so a dip will reduce borrowing with those. Others will consider the most recent year alone if the trend is explained. A written explanation from your accountant helps considerably.
I am a contractor on a day rate — how is that assessed?
Several lenders assess contractors on day rate rather than accounts, typically multiplying the daily rate by five and then by 46 or 48 weeks. This often produces a far higher figure than your accounts suggest, and applies to many IT, engineering and construction contractors across Leicestershire.
Do I need a bigger deposit if I am self employed?
No. Deposit requirements are the same as for employed applicants — 5% is possible, 10% or more improves the rate. Being self employed affects how your income is calculated, not how much deposit you must find.
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