Self-employed are twice as likely to be rejected for a mortgage

Christina Hoghton
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Christina Hoghton

Proving your income to a mortgage lender can be more difficult when you work for yourself

Self-employed individuals are twice as likely to be rejected for a mortgage than employed borrowers, according to The Mortgage Lender (TML).

The specialist mortgage lender found that nearly a quarter (23%) of self-employed individuals have had their mortgage application denied in the past compared to just 12% of employed workers.

Complex incomes

Self-employed applicants are sometimes treated with stricter affordability assessments to those who are employed, said TML, mainly because they are considered to have a more irregular or complex incomes and are therefore viewed as riskier to lenders.

This can make it trickier to get through the mortgage process for the UK’s 4.2 million self-employed people. While some self-employed people can also be high earning, income is still deemed complex, which can make it challenging for this group to access finance to either buy or re-mortgage a property.

Peter Beaumont, CEO at The Mortgage Lender said: “While it may offer those workers more freedom, the major drawback of self-employment is the perception of income inconsistency, and consequently a greater challenge when it comes to borrowing large sums of money.

“Fortunately, there are steps the self-employed can take to make themselves more attractive to lenders, like increasing their credit score, or saving for a bigger deposit to bring down their loan-to-value ratio.

“At the same time, however, the onus must fall on lenders to be more open to working with these enterprising individuals. We are proud to offer a competitively priced product range that caters to those with complex incomes.”