Saving for a mortgage: Top tips for the self-employed

As we get into the swing of the new year, you may find yourself seeking out a fresh start in the shape of a new home. Being self-employed, you may also assume that buying a property will be more difficult for you than an employed person, but there’s no need to worry.

In this blog post we’ll share our top tips for saving money when you’re self-employed and how to go about buying a new home.

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Getting a mortgage when self-employed

There are many benefits to being self-employed, most significantly the flexibility and independence it offers. But, with these freedoms you have the responsibility of managing your own finances. When it comes to getting a mortgage, you will still need to be able to prove your income and – if you haven’t kept up with your finances – this can sometimes be difficult.

Realistically, being self-employed doesn’t make mortgage lenders less likely to approve your application, all it means is that you may have to be more organised in your approach to managing your finances.


Top tips on how to save for a mortgage

In order to make the most of your situation, follow these top tips suitable for any potential self-employed borrower:

Keep your finances organised

As soon as you decide to apply for a mortgage, it’s very important that you ensure your finances are in order, your accounts are up to date and that have budgeted for costs such as valuation fees, solicitor fees and any stamp duty (purchases only).

Being self-employed means your monthly income is likely to fluctuate. Because of this, it’s especially important that you budget. That way you’ll have a clear idea of where all your money is going, and you can highlight areas where you may be able to save extra money. This could be especially helpful if you find yourself overspending and you’re not sure how.  

If you have a month where you earn more than average, putting that extra money into savings to supplement the less profitable months is an effective way to keep on top of your finances.

Don’t put off your tax return

As soon as you become self-employed you must tell HMRC and start paying tax on your profits. Reviewing your accounts throughout the year can make it a lot easier to calculate how much you’ve earned. You’ll have to submit a yearly tax return and will then be told how much tax you owe. Make sure you pay HMRC before the deadline. You’ll run the risk of being charged interest or having to pay a penalty if your payment is late.

Talk to a professional to understand your options

Hiring an accountant is not a requirement, but they’re favoured for their expert knowledge of how to handle tax and all the forms and paperwork that come with it. Accountants typically have specialised knowledge, meaning they know all the rules to minimise tax legally. They’ll also be able to offer advice as to whether your current business setup is actually the best for you, especially with regard to tax-efficiency.

If you decide you want to apply for a mortgage, keep your accountant aware of how much you’re hoping to borrow. Together your accountant and your mortgage broker will be able to advise you on the best way to organise your earnings in order to get the best mortgage deal for you.

For a self-employed borrower specifically, an independent mortgage broker can save a lot of time and stress. They can guide you through the process and give you access to a wider range of mortgages, knowing what lenders are best for you, and what lenders may be more likely to take retained profits into account. A mortgage broker can guide you every step of the way, no matter how complex your situation. For help with your self employed or freelance mortgage, contact John Charcol on 0333 331 7293 or enquire now.

Meet the author

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John Charcol

The Original Independent Mortgage Broker

With offices in the City of London, Birmingham and Southampton and a network of advisers across the UK, John Charcol help clients arrange mortgages with a total value of £2 billion each year. For 40 years, each and every one of our advisers have kept themselves up to date with the mortgage market to ensure their advice helps our clients manage the present and plan for the future. The goal posts in the mortgage market are forever moving which can make it a complex and confusing world. We aim to help our clients cut through the noise and help them through the process of applying for a mortgage.