Getting a joint mortgage when one applicant is self-employed

Applying for a mortgage can be daunting but rest assured the process is seamless and hassle-free when you have the right mortgage broker by your side.

If you’re thinking about applying for a joint mortgage where one applicant is self-employed, you’re in the right place. In this article we answer FAQs to give you the answers you’re looking for.

Can you get a joint mortgage if one person is self-employed?

Yes, you can get a joint mortgage if one applicant is employed and the other is self-employed. Being self-employed doesn’t affect the type of mortgage you can apply for, the loan-to-income ratio you can borrow, or the interest rate you’ll be offered. So long as both applicants meet the lender’s criteria you’ll be eligible to apply for a joint mortgage. 

The only difference between applying for a mortgage as a self-employed person versus an employed person is how you prove your income and what documents you’ll need to demonstrate your affordability. 

What documents do you need if one applicant is self-employed?

If you’re employed on a PAYE basis you’ll need to show three payslips and three months’ bank statements. However, if you’re self-employed, proving your income is not quite as straightforward. Each lender has their own set of criteria and requirements, some lenders may request more proof and documentation than others. Here is a rough guide depending on your self-employed status:

Limited Company Director

• Business bank statements
• Proof of salary
• Proof of dividends
• Tax returns

Sole Trader

• SA302 tax returns for 2 or 3 years
• Business bank statements

Freelancer or Contractor

• SA302 tax returns for 2 or 3 years
• Contracts and service agreements
• Bank statements

How much can you borrow if one applicant is self-employed?

When applying for a joint mortgage where one applicant is self-employed, your affordability will be calculated based on 3 to 5 times your combined annual income, minus any existing financial commitments and taking into account your credit score.

Existing financial commitments could include monthly repayments for personal loans or car finance for example. 

For the employed applicant calculating affordability will be fairly straightforward. For the self-employed applicant there are several variables that are taken into account and no two borrowers are the same. Here is a guide of how your income might be calculated depending on your self-employed status:

Limited Company Director

• An average of your salary plus dividends over the last two to three years
• Some lenders will also consider your retained net profits 

Sole Trader

• An average of the last two to three years’ SA302 tax returns 
• Some lenders will consider applicants with less than two years’ tax returns

Freelancer or Contractor

• Your day rate annualised

Is it difficult to get a joint mortgage if one person is self-employed?

No, it’s very common when people are applying for a joint mortgage to have one employed and one self-employed applicant. You may have to gather a few more documents to prove your affordability but that doesn’t mean you are less likely to be offered a mortgage.

Does a joint mortgage have to be paid from a joint bank account?

No, you do not have to set up a joint bank account to pay for a joint mortgage. You can pay a joint mortgage from a bank account owned by just one applicant. However, using a joint bank account can make it easier to manage shared financial responsibilities such as utility bills and food shopping.

Can a joint mortgage be paid by one person?

Yes, you can take out a joint mortgage and have just one applicant pay the mortgage. For example, depending on your personal and financial circumstances, you may decide that one of you will pay the utility bills and the other person will pay the mortgage. 

However it’s important to note that if the mortgage is in joint names you are both responsible for making sure that the repayments are met.

Do both people have to be on the mortgage?

No, if one applicant has enough borrowing power to afford the mortgage using only their income you can apply for a mortgage in just one name. However, if both people are contributing toward the deposit and both are paying the mortgage it’s important to seek legal advice first as both parties will have an interest in the property. 

Can you transfer a joint mortgage to one person?

Yes, it’s possible to transfer a joint mortgage to just one person. If you’re thinking about buying out a partner and taking on a mortgage by yourself, there are several factors to consider.

For example, how much deposit did your partner contribute, how much equity is in the property, and has the property gone up in value since you purchased it. You’ll need to speak to a mortgage adviser to assess your affordability and determine the most viable way to buy out your partner.

You may choose to stay with your current lender or you can take out a new mortgage with a different lender. Whichever option you choose, you’ll need to seek legal advice as part of the process.

Speaking to a mortgage broker

If you are ready to start viewing properties the first step is to speak to a mortgage advisor. Once you have spoken to a mortgage broker they will be able to tell you how much you can borrow and what the maximum purchase price is that you can afford.

Speak to us today about your mortgage requirements and check out our reviews to see why our customers trust and recommend Fosters Financial.