Mortgages for Self Employed – How lenders calculate income.
Different lender asses self employed income in different ways, and importantly each method can result in a large difference between how much they will lend to the self employed applicant. Here are the main basic ways lenders assess self employed income.
- Average of net income. They will take either the last 2 or 3 years net income figure and average them out. This net income figure is the net figure on your SA302. Not the gross!
- Figure from most recent year. They will use the net figure from your most recent SA302. Often as with above this shouldn’t be more than 12 months old.
- Profit figure before tax. This method is perhaps the rarest, but some lenders will take the net profit figure from your account before tax. They will then require two years and use an average.
The above is why it is so important for the self employed to contact a professional advisor who has experience in helping self employed clients.