Joint Mortgages When One Person is Self-Employed
There are many advantages to joint mortgages. You could receive a greater total loan and you will have more rights over the property. It can also be a good way for Self-Employed people to overcome the challenges of getting a mortgage.
Can you get a joint mortgage if one applicant is Self-Employed?
Anyone can apply for a joint mortgage – but whether you’re accepted will depend on the lender and their criteria.
Generally, it’s easy for a lender to decide if someone on a full time salary is a suitable applicant. Often, they see a Self-Employed person as a riskier customer with a more erratic income.
Because of that, you might have better success applying for a joint mortgage with someone in a salaried job than as a single, Self-Employed applicant.
How much can you borrow if one applicant is Self-Employed?
One of the key advantages of a joint mortgage is that the lender combines your incomes to calculate how much to offer you. So a joint mortgage will normally mean you can buy a more valuable property than a single mortgage. This is true for first time buyers, home movers and most other house-buying situations.
The lender will assess your income based on your salary, or, if you’re Self-Employed, from the income stated on your self assessment tax return. The norm is to offer four times your combined income as the mortgage total. Some lenders might offer up to five times your income, but beware of overstretching yourself. If you’re unable to meet the monthly mortgage repayments you risk losing your home.
What documents do you need if one applicant is Self-Employed?
There are a few documents you’ll be asked for when applying for a mortgage. Both applicants are asked for proof of identity – a UK photocard driving licence or passport, plus proof of address via a bank statement or utility bill dated within the last four months.
The employed applicant will need to supply payslips to prove their income dating back up to six months.
The Self-Employed applicant will need to supply information that confirms their income. This might include:
Sole traders and partnerships: One, two or three years’ tax calculations. These might be printouts from the HMRC website, SA302 (self assessment forms) or a summary produced by your accountant. The latest tax information must be dated within the last 18 months.
Limited Company: Finalised accounts for the last one, two or three years, the most recent filed in the past 18 months. Each year of accounts should state the applicant’s salary. If not, you might need to supply P60 forms or tax calculations.
Bear in mind too that the lender will check your credit reports. If either applicant has poor credit scores, seek advice. Depending on the severity of the credit issues it may be better to progress with a single mortgage application rather than a joint one.
Does a mortgage have to be in joint names?
Mortgages can be taken out by one person or by up to four people on a joint mortgage. The type of mortgage will not automatically spell out who ‘owns’ the home. This is part of the legal work done when you buy a property.
In England and Wales, a property can be jointly owned by two or more people as joint tenants or as tenants in common. You and the co-owner will need to decide which type of joint ownership suits you best.
When a property is owned as a joint tenancy, the tenants share ownership of the whole property – neither holds a specific share. If one owner dies, the property automatically passes to the other joint owner.
If you own a property as tenants in common, each owner has a defined share of the property. It’s often 50-50, but could also align with the financial contribution from each person. If one owner dies, their share in the property is passed on in line with their Will and inheritance laws.
Your chosen ownership structure will be stated on the Deed of Trust. When you sell the property, this structure will confirm how much each party might receive.
How can a Mortgage Broker help if one applicant is Self-Employed?
Mortgage Brokers are experts in the mortgage buying process. We’re here to help you navigate the complexities of buying a property, according to your personal financial situation. We can inform you about the mortgage providers that are likely to accept a joint Self-Employed mortgage and how best to get a competitive rate.
We’re registered in England and authorised and regulated by the Financial Conduct Authority, giving you peace of mind that we are reliable and independent experts.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.