Mortgage as a Sole Trader
A mortgage is likely to be the single largest financial commitment you ever make. There’s a wide range of mortgage products out there, with varying interest rates and repayment options available.
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Mortgage as a Sole Trader
Michal Iwinski explains how the mortgage process works if you are a sole trader.
Podcast approved by The Openwork Partnership on 08/05/2025.
Can I get a mortgage if I’m a sole trader?
Yes, sole traders can of course get a mortgage. The process might involve more paperwork and scrutiny, but it’s not impossible.
Mortgage lenders will assess your income and affordability, as with any applicant, but it’s likely you will need to provide more documentation to demonstrate your income and business stability.
How long do I need to be a sole trader before I can get a mortgage?
Most mortgage lenders will require a sole trader to have been trading for at least two years before they can provide a mortgage. However, some lenders may consider applications from sole traders with only one year of accounts, especially if you have a good credit score, a strong deposit or your business is similar to previous full-time jobs.
What documents do I need to prove my income?
To prove your income as a sole trader when applying for a mortgage, you generally need to provide two or three years of self-assessment accounts. The main document is called an SA302, plus your tax year overview from HMRC.
Additionally, you’ll need business and personal bank statements for the past few months to demonstrate your spending habits.
How does the mortgage process differ between a sole trader and a limited company?
The mortgage process differs primarily in how income is assessed for affordability. Sole traders typically use their net profits from business, while limited company directors might use a combination of salary, dividends and potentially retained company profits.
While the basic process of applying for a mortgage remains similar, the documentation required and how lenders interpret income can vary.
What is very important, though, is that if you’re running a limited company and you hold more than a 20% share in your business, you’ll still be treated as self-employed by the lender.
How much can I borrow as a sole trader? Do I need to put down a bigger deposit?
As a general rule, lenders work out an average of your last two years’ profits, but some will just use your most recent year. They then multiply that by between 3.5 and 5.5 to calculate how much to lend you.
Of course, it helps if you have no debts, because your debts will be deducted from your affordability.
Some lenders will give you a mortgage as a sole trader with a 5% deposit, but you will need to have a good credit score to qualify.
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What if I have bad credit? Can I still get a mortgage as a sole trader?
It’s possible to get a mortgage as a sole trader even with bad credit. While it might be more challenging than with good credit, there are specialist lenders that cater for borrowers with impaired credit histories.
You may need to prove your income more rigorously, potentially provide a larger deposit and you could face higher interest rates.
Can I get a Buy to Let mortgage as a sole trader?
Yes, a sole trader can get a Buy to Let mortgage. While Buy to Let mortgages primarily assess the property rental income potential, lenders may still require proof of personal income and a good credit history.
The focus is on demonstrating the property’s ability to generate sufficient rental income to cover the mortgage repayments, as well as other costs. Basically, it’s exactly the same as for people who are employed.
How does the remortgaging process work for a sole trader?
The mortgage process for a sole trader is similar to that for an employed person, but with more emphasis on proving income through financial statements and tax returns.
Lenders require detailed documentation, such as two or three years of audited accounts or tax returns – those SA302s – to assess affordability. Affordability is still key, and the lender will assess whether a sole trader can comfortably meet the mortgage repayments.
How do I apply for a mortgage as a sole trader? What is the process here?
It’s the same process as if you’re employed. Lenders request the last two or three years of accounts, your tax year overviews and full credit files to establish the level of your debts. Those would obviously reduce your affordability. Your credit score will determine how much deposit you’re likely to require. Generally, the better the credit score, the lower the deposit required.
How can a mortgage broker help here? Is there anything else I need to consider as a sole trader?
As always, we strongly recommend seeing your mortgage broker as soon as you have made the decision to buy a property. As a self-employed person, preparation is key.
We also encourage self-employed customers to generate a decent net profit to maximise affordability, which helps avoid disappointment. And, at Aries Financial, our initial consultation is fee-free.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
MOST BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
Approved by The Openwork Partnership on 08/05/2025.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.