Lenders assess the income of self-employed applicants differently than they do for salaried individuals. They typically evaluate your income using the following methods:
Trading Profits: For sole traders and self-employed individuals, lenders often base their assessment on your trading profits as reported on your tax returns. They may average your income over the past two to three years to determine your average annual earnings.
Salary and Dividends: If you’re a director of your own Limited Company, lenders may consider both your salary and any dividends you receive. They often examine your personal and business tax returns to calculate your total income.
Recent Performance: Some lenders may give more weight to your most recent financial performance, especially if your income has been increasing steadily. They may use your most recent year’s figures as the basis for their assessment.
Accountant’s Reference: Lenders may request an accountant’s reference or a certified set of accounts to verify your income.
It’s crucial to note that different lenders have varying criteria and policies for assessing self-employed income, so it’s wise to consult with a mortgage advisor who are experts in self-employed applicants to find the lender and mortgage product that best suits your financial situation.