Joint Mortgage
when One Applicant is Self Employed

Joint Mortgages when one is for Self-Employed 

Two individuals, one self-employed and the other in employment can be joint applicants for a mortgage for both residential and buy-to-let property purchases. The critical factor here is the lending criteria. Some Lenders assess self-employed applicants differently. Therefore, it is essential to select a suitable Lender, comfortable with both applicants’ employment status.

What is a joint mortgage?

A joint mortgage is when there is more than one applicant. Applicants can decide between them how to share the equity in the property. This is the percentage that each applicant owns of the property, which increases as the borrowers pay off more of the mortgage.

Who can apply for a joint mortgage?

Couples generally obtain joint mortgages. All the parties included in the mortgage are responsible for meeting the payment obligations. They are available to married couples, unmarried couples, and civil partners. Two people take out most joint mortgages, but some Lenders will allow up to four people to buy together.

You could also buy a home with:

  • One or more colleagues or family members you are planning to live with
  • A friend or family member who wants to help you afford a property or buy part of one as an investment
  • A commercial investment partner who wants to buy property with you

How are PAYE and self-employed applicants assessed?

Employed PAYE applicants are mainly assessed based on their basic annual income. Lenders use the latest three months’ pay-slips to verify the annual income. If the basic monthly salary varies, they take the average amount. 

Further, allowances and bonuses are considered in different ways by different Lenders. Some Lenders allow the full amount of guaranteed allowances along with the basic salary. Other Lenders include only a percentage of the bonus for the purposes of the mortgage affordability calculation.

On the other hand, self-employed applicants are assessed mainly based on the income verified via SA302 tax calculations. Also, for self-employed daily rate IT contractors who are contracting via their own limited company, High Street Lenders use their annualised daily rate to calculate mortgage affordability.

How does a joint application impact the amount I can borrow?

Lenders assess applicants in different ways depending upon their employment status. For example, if applicant number one is employed on a PAYE basis and applicant number two is a daily rate IT contractor, the maximum affordable loan amount could be high compared to a self-employed applicant whose income is verified via SA302 tax calculations. 

In simple terms, joint applicants can borrow more than individual applicants, based on risk profiles and income assessments. Lenders also perceive this as a good situation as the risk is diversified between two people.

How does joint ownership work?

Joint applicants are jointly responsible for ensuring the mortgage payments are made on the agreed date. If a payment is missed or late, it will impact both peoples’ credit files, irrespective of whose account is used to settle the mortgage payments.

When it comes to making changes to the mortgage, changing a joint mortgage application could be complex compared to amending an individual application. For example, if one applicant needs to change the term of the mortgage, request additional cash, or change the repayment method, all the applicants must provide their consent. 

Joint Mortgages VS Individual Mortgages

Overall, it is good to apply for a joint mortgage as long as the Lenders are happy with the overall risk profile, credit scoring, and equity structure. From the applicants’ perspective, both employed and self-employed people can apply for a mortgage and may secure the required loan-to-value ratio. However, as mentioned above, a joint application gives the applicants a chance to borrow a higher mortgage amount.

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage payments.