Getting a mortgage when you are self-employed in Ireland can sometimes be more challenging than for PAYE workers. Self-employed mortgage applications can take longer to process for the self-employed. So, be patient and be prepared to provide additional documentation when requested.
Who is classed as self-employed?
- If you have PAYE employment, plus freelancing – you can include your freelance income as self-employed income.
- A sole trader who have their own business
- A Director of a Limited Company, or a Partnership with over 15% share
Self-employed mortgage applicants require much of the same documents with additional documents relating to their employment.
Note: See Mortgage Documents checklist here.
Here are some tips to improve your chances of a successful mortgage application.
Organize your finances (self employed mortgage)
Lenders want to see evidence of your income and financial stability. This includes:
- bank statements
- tax returns
- profit and loss statements
- any other relevant financial documents
Form 11
Form 11 is a Revenue document confirming your declared income. Most lenders require your two most recent Revenue acknowledged Forms 11, or three years in some cases where the income fluctuates.
Tip: How to submit Form 11 online via ROS.
Chapter 4
This is a statement of total income or profit, tax chargeable and tax paid for a particular tax year. You can find Chapter 4 in your Revenue
On-Line Service (ROS) inbox after you have completed the tax return and self assessment for the tax year.
Bank statements
You need to provide six months of bank statements from your personal account and business account.
Best practice is to keep your personal and business accounts separate. This ensures that lenders can clearly see which purchases were personal, which were business. Therefore, you need to demonstrate that your personal spending and savings habits can ensure capacity to repay a mortgage
Audited accounts
Depending on the lender, you will be required to submit two to three years of company accounts. These accounts need to be certified by an accountant to show they are correct.
Tip: Use an Accountant. Working with an accountant can help ensure that your financial records are accurate and up-to-date. They can also provide advice on minimising your tax liabilities while maximizing your income.
Self employed mortgage – income and affordability calculation
The lender wants to observe your personal spending and income to determine your capacity to repay the mortgage.
- For sole traders and partnerships, the business gross profits (before tax) are counted as income.
- For directors of limited companies, mortgage lenders can look at your salary plus dividends
Using retained profits to finance a self employed mortgage
If you’re a limited company owner, and haven’t used your profit yet, you might want to use the retained profit to get a mortgage.
However, lenders do not accept retained profit as an income amount. This is because there is a risk that difficult trading periods could result in those profits being consumed by the business. Should you increase your income from the company at the cost of retained profit to support your mortgage application?
Protect your income
The lender wants to see that you are able to repay the mortgage. Demonstrating that you have taken measures to protect your income will stand to your application.
Income protection insures your income in the event of illness.
If you are a key figure in the business, business insurance will protect you as the main asset of the company and insure its viability.
Minimize debt
Reduce outstanding debt as much as possible before applying for a mortgage. This will improve your debt-to-income ratio, making you a more attractive borrower.
A good credit report is crucial for getting a mortgage. You can request your CCR (central credit register) report online on the Central Bank of Ireland website.
Make sure you pay your bills on time and avoid any defaults or missed payments.
Self employed mortgage broker specialist
Mortgage brokers specialize in finding mortgages for individuals who may not meet the criteria of traditional lenders. They can help you navigate the process and find the best mortgage deal for your circumstances.
Remember, every lender has different criteria. Hence, if you are unsuccessful with one, you can get approval by another. Keep persevering, and with careful planning and preparation, you can improve your chances of getting a mortgage as a self-employed individual in Ireland.
