Obtaining a mortgage as a self-employed individual can feel challenging, but with the right preparation and knowledge, it’s entirely achievable. In recent years, lenders have become more accommodating toward self-employed applicants, recognising the increasing number of people choosing to work for themselves. However, the process does require a slightly different approach compared to traditional employees.

In this guide, we’ll outline the key steps to securing a mortgage as a self-employed person, common challenges you might face, and how to overcome them. Whether you’re a contractor, freelancer, or business owner, this blog will help you understand the process and increase your chances of getting approved.

1. Understand How Lenders View Self-Employed Applicants

Lenders evaluate self-employed individuals differently because their income may vary month to month or year to year. Their primary focus is on ensuring you have a stable and reliable income to cover mortgage repayments.

Key Factors Lenders Consider:

• Income Consistency: Lenders look for steady income over at least two to three years.
• Profitability: For business owners, the profitability of your company plays a significant role in determining your borrowing capacity.
• Affordability: Your income should demonstrate you can comfortably afford monthly repayments, even in fluctuating economic conditions.
• Credit History: A strong credit score is critical to demonstrate your reliability as a borrower.

2. Gather the Required Documents

Self-employed individuals often need to provide more documentation than traditional employees. The exact requirements vary by lender, but the following documents are typically needed:

a. Proof of Income

• Self-Assessment Tax Returns (Form 11): At least two to three years of completed and filed returns.
• Revenue Acknowledgments: Evidence of tax payments and compliance with the Irish Revenue Commissioners.

b. Financial Statements

• Profit and Loss Statements: These should be prepared by a qualified accountant and provide an overview of your business’s financial health.
• Balance Sheets: To show assets, liabilities, and equity.

c. Bank Statements

• Personal and business bank statements from the last six months to one year.

d. Credit Report

• Obtain your credit report from the Irish Credit Bureau or the Central Credit Register to check your credit score and identify any issues.

3. Improve Your Mortgage Eligibility

To strengthen your mortgage application, take the following steps:

a. Establish a Stable Income

• Aim to show consistent earnings over a minimum of two to three years.
• Reduce income volatility by diversifying your client base or securing long-term contracts.

b. Save for a Larger Deposit

• Having a larger deposit (typically 10-20% of the property value) improves your loan-to-value (LTV) ratio, making you a lower-risk applicant.

c. Reduce Debt

• Pay down outstanding personal loans, credit card balances, or business debts before applying for a mortgage.

d. Maintain Separate Accounts

• Keep personal and business finances separate to make it easier for lenders to evaluate your income.

e. Build a Strong Credit History

• Pay all bills on time and avoid missing repayments to improve your credit score.

4. Explore Mortgage Options for Self-Employed Individuals

Self-employed applicants can access a variety of mortgage products, including:

a. Fixed-Rate Mortgages

• Provides stability with fixed monthly repayments over a set period, making it easier to budget.

b. Variable-Rate Mortgages

• Offers flexibility, with interest rates that fluctuate over time. This could be advantageous if rates decrease.

c. Tracker Mortgages

• Tracks the European Central Bank’s interest rate, offering transparency and potential savings.

Tip:

Consult with a mortgage advisor to find the best product for your needs and financial situation.

5. Work with a Qualified Accountant

Lenders often require financial statements prepared by a qualified accountant. Working with an accountant familiar with mortgage requirements can help ensure your documents are accurate and meet lenders’ expectations.

Benefits of Hiring an Accountant:

• Prepares professional accounts that lenders trust.
• Helps optimise your finances for mortgage approval.
• Provides guidance on tax efficiency without compromising eligibility.

6. Choose the Right Lender

Not all lenders treat self-employed applicants equally. Some are more flexible and willing to consider unique circumstances, while others may have stricter criteria.
Research Lenders

• Look for lenders with experience working with self-employed individuals.
• Consider approaching credit unions, which may offer more personalised assessments.
• Get a Mortgage Broker
• A mortgage broker familiar with self-employed applications can match you with suitable lenders and streamline the application process.

7. Prepare for Potential Challenges

Being self-employed comes with unique challenges when applying for a mortgage. Understanding these obstacles in advance can help you address them effectively.

Common Challenges:

• Income Volatility: Lenders may hesitate if your income fluctuates significantly year to year.
• Limited Financial History: New businesses may struggle to provide the required two to three years of accounts.
• High Expenses: Deducting many business expenses may reduce your taxable income, affecting how much you can borrow.

How to Overcome Them:

• Provide detailed explanations for income variations, such as seasonality.
• Present projections or contracts that demonstrate future income stability.
• Work with a lender or broker experienced in handling complex cases.

8. Plan for Additional Costs

Beyond the property price, factor in the following costs associated with buying a home:

• Stamp Duty: Typically 1% for properties up to €1 million and 2% for values above that.
• Legal Fees: Costs associated with conveyancing (around €1,000–€2,000).
• Valuation Fee: Required by lenders to assess the property’s value (around €150–€250).
• Survey Fee: A structural survey to identify potential issues with the property (around €300–€600).

9. Apply for Mortgage Approval in Principle

Before house hunting, apply for Approval in Principle (AIP) with your chosen lender. This preliminary approval indicates how much you can borrow and shows sellers you’re a serious buyer.

What You’ll Need for AIP:

• Completed application form.
• Supporting documents (tax returns, bank statements, financial accounts).
• Proof of identification and address.
• AIP is usually valid for six months, giving you time to find the right property.

10. How Med Account Solutions Can Help

At Med Account Solutions, we specialise in supporting self-employed professionals, including contractors, freelancers, and business owners, through the mortgage process. Our expertise ensures you’re well-prepared to meet lender requirements and increase your chances of approval.

Our Services Include:

• Financial Statement Preparation: Accurate and lender-approved accounts to demonstrate your income stability.
• Tax Compliance: Ensuring your self-assessment tax returns and other filings are up-to-date.
• Credit Score Improvement: Advice on improving your creditworthiness.
• Mortgage Application Support: Guidance on selecting the right lender and submitting a strong application.

Final Thoughts

Securing a mortgage as a self-employed individual in Ireland may require more preparation and documentation, but it’s entirely achievable with the right approach. By understanding lender requirements, improving your financial position, and working with experts like Med Account Solutions, you can simplify the process and achieve your homeownership goals.

For personalised support with your mortgage application or financial management, contact Med Account Solutions today. Let us help you make your self-employed journey to homeownership as smooth and successful as possible.

*Note the above article is for information purposes only.