Self Employed Bad Credit Mortgage

We will work with you to understand your situation and needs, then develop personalised advice to help you achieve your goals.

Get in touch

1 Step 1
reCaptcha v3
keyboard_arrow_leftPrevious
Nextkeyboard_arrow_right

Self Employed Bad Credit Mortgage

Diarmuid Phoenix explains the process of getting a mortgage if you are self-employed and have bad credit.

What are the main challenges self-employed individuals with bad credit face in securing a mortgage?

The obvious challenge is that there are a limited number of lenders willing to risk lending to anyone with bad credit – including self-employed people. In order to cater for this additional risk, lenders will also apply higher interest rates. Other seemingly negative restrictions can also be a disadvantage.

How can self-employed individuals with bad credit improve their chances of getting a mortgage?

They may need a higher deposit than the usual 5% minimum. Bad credit can be quite a broad brush term. It could be anything from a couple of missed payments to defaults and county court judgements (CCJs).

What we often find is that if you’ve got a 5% deposit and are planning for a 95% mortgage, with bad credit a lender might come back with a decline or a revised offer. They might say they will accept your application with a 15% deposit.

If you’re in this situation, be prepared to wait or to have to save a little longer than you’d hoped to come up with additional funds and get things moving.

What documentation do self-employed individuals with bad credit need when applying for a mortgage?

Lenders can sometimes ask for additional income evidence going further back in time than they normally would for self-employed people. That might mean having to come up with three years’ self-employed accounts instead of the normal two years, or they might want bank statements going back 12 months rather than the typical three months.

Lenders take more precautions to get a clearer picture of the applicant’s past finances. Sometimes bad credit can be a temporary or one-off thing, and it’s not typical behaviour for the applicant. Looking back a little bit further can sometimes be useful in satisfying the lender’s concerns.

Can self-employed individuals with bad credit get a mortgage without a large deposit?

It will depend on how bad the credit file is. If it’s minor, for example, one or two late payments or a small default, and it can be easily explained because of particular circumstances, lenders might overlook that.

In many cases, normal lending criteria will apply for deposits. But if there’s a pattern of not looking after your finances properly with regular defaults over a number of years, it’s unlikely lenders will consider normal lending criteria. They may ask for larger deposits or offer smaller lending amounts. It could also result in applicants being declined entirely.

What interest rates can self employed individuals with bad credit expect to pay on a mortgage?

Similar to employed people, self-employed applicants with bad credit will have a limited number of lenders, which could mean higher interest rates.

At the time of recording, in December 2024, you could be looking at rates of over 7%. Hopefully, 12 months from now we’ll be looking at less than that. Here’s hoping.

Speak to An Expert

Expert Mortgage Advisers

We work with dozens of lenders

Access to competitive rates

We will work with you to understand your situation and needs, then develop personalised advice to help you achieve your goals.

What role does a credit score play in getting a mortgage as a self-employed borrower with bad credit?

There are different credit reference agencies that lenders use. One lender might use Experian, another might use Equifax, some might use ClearScore. There’s a whole host of them.

Some lenders have their own internal scoring system. The scores can have a significant effect on borrowing amounts, especially for self-employed people, and reduce the amount you can borrow.

There are different methods for assessing affordability for the self-employed, based on two or three years of accounts. Lenders sometimes take an average – if someone’s had a slower year they’ll take an average of the previous two years, which might mean less borrowing.

Bad credit can be picked up on the searches, which can have a negative impact.

Do any mortgage lenders specialise in lending to self-employed individuals with bad credit?

In recent times we’ve found lenders like Kensington, Accord and Leeds Building Society can be more sympathetic towards applicants with bad credit.

We’re operating in Northern Ireland the majority of the time, but in the rest of the UK there are more specialists in bad credit. So that initial list is not exhaustive by any means.

Whether an applicant’s employed or self-employed, these lenders look at those with impaired credit. There’s always a price for the additional risk that a lender is going to take, so you need to bear that in mind.

How long does it take for self-employed individuals with bad credit to get a mortgage offer?

It may take a little longer – there may be additional checks by the lender and hoops to jump through, including getting the credit file looking a bit better.

Quite often people come to us looking for mortgages and have a couple of minor things on their credit file. It might take a little bit of time before they fall off, or they’ve got to make a few changes.

Perhaps their credit facilities are maxed out – they could simply pay off some of the credit card balance, or extend the limit on it, and that can immediately improve their credit score. It could take a few months to correct itself via the credit reference agencies like Experian.

It could even take several years depending on how bad the credit issue is – it takes six years for defaults and CCJs to disappear from your file. So for some applicants, sadly, it could take longer.

What steps can self-employed individuals with bad credit take if they have been declined for a mortgage?

Speak to a broker. Do your homework and find one with a track record of helping people in a similar situation. We’ve often come across clients who’ve been to several different brokers that haven’t been able to help, for one reason or another.

That’s no criticism of other brokers, it’s that some are more experienced or have an appetite for those types of cases. A good, experienced broker will be able to guide you on how to clean up your credit file. It could be something minor and straightforward, or it could be guidance on playing the long game. We can certainly help you get started on the right path.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

Why Mint Mortgages & Protection

Self Employed Bad Credit Mortgage
Access to 1000s of mortgage products
Self Employed Bad Credit Mortgage
Save money, time and hassle
Self Employed Bad Credit Mortgage
Expert knowledge at getting you the best deals
Self Employed Bad Credit Mortgage
Advice to protect yourself and your family
Self Employed Bad Credit Mortgage
Access to 1000s of mortgage products