Agreement in Principle Self-Employed
- Access to over 100 lenders
- Access to exclusive deals not available on the high street
- Range of products to suit both personal and business needs
What's On This Page?
Get In Touch
Agreement in Principle Self-Employed
Xavier Collin explains how an Agreement in Principle works if you are self-employed.
Can you get an Agreement in Principle if you’re self-employed?
Anyone can get an Agreement in Principle, regardless of how you receive an income. It could be through employment, self-employment, or even other sources like benefits, rental income and pensions.
It, of course, needs to be within the lender’s criteria but, as advisors, we would check that over before making a recommendation and submitting an Agreement or Decision in Principle on your behalf.
Is it harder to get an Agreement in Principle if I’m self-employed?
I wouldn’t say it’s any harder to get an Agreement in Principle if you’re self-employed. It’s obviously worth noting that the income is assessed differently when you’re self-employed, though. The majority of lenders look at your earnings from the last two to three years, which can make it a little more complicated than for an employed applicant.
But that isn’t something to worry about. That’s why you’d have an advisor such as ourselves to work through it and assess your income. We’ll ascertain the most appropriate lender for your circumstances.
How is self-employed variable income assessed for an Agreement in Principle (AIP)? Can I use more than one source of income when I apply for an AIP?
Lenders can definitely look at multiple sources of income for a mortgage. They’ll want to make sure they are all plausible and sustainable over the term of the mortgage.
But in general, lenders are very lenient with the different sources of income that can be used. If you’re not sure whether something would be accepted towards getting a mortgage, do reach out. We’d be more than happy to have a look into it and let you know.
How is affordability calculated for an Agreement in Principle for self-employed borrowers?
Lenders usually look at your earnings over the last two to three years, but there are different types of self-employment. For sole traders and people in a partnership, lenders will be looking at your net profit from self-employment.
This would show on what’s called a tax computation, which is produced after you’ve done your tax return. Most lenders, again, look at the last two years, but some look at the last three years.
For limited company directors, typically with a 20% to 25% shareholding or more, lenders will look at the salary and dividends the director has taken. That said, some lenders look to use the share of net profit instead of the dividends.
That can be handy for applicants who leave the majority of their profit within the business and only take a small wage of exactly what they need to get by.
What documents do self-employed borrowers need to provide when applying for an Agreement in Principle?
All applicants who are self-employed will need to provide their SA302s – the tax computations I just mentioned. They’ll come with corresponding tax overviews.
The SA302 shows what income you’ve earned and what tax is due, and the tax overview confirms that tax has been paid on that income.
Those are basic documents that all lenders will ask for. They may also request full company accounts for limited companies, tax returns, also known as SA100s, and potentially business bank statements as well.
Speak To an Expert
How reliable is an Agreement in Principle? How long is it valid if I’m self-employed and my income changes?
Just to avoid any confusion, an Agreement in Principle isn’t necessarily an agreement to lend. It means that the lender is happy to consider an application based on the information that’s being provided.
A formal agreement to lend will always be subject to a full mortgage application, at which point the lenders will request documents and verify all the information provided. They’ll appoint someone called an underwriter to assess the plausibility of the application as a whole, and there’ll also be a valuation of the property.
But an Agreement in Principle is still a very important step in the process. A standard Agreement in Principle is valid for three months.
With regards to a change in income, if there’s been any change in circumstances, you will need to obtain an updated Agreement in Principle, because any change to your circumstances could impact the lender’s ability to lend.
Will I need a credit check? Does an Agreement in Principle affect credit score?
People are concerned about their credit score these days, which is nice to see. It’s good to be conscious of how credit score affects applying for mortgages and other things.
Any Agreement in Principle will include some form of credit check. Some lenders look at your overall credit score, while others look at your credit conduct. On more of a manual basis, they’ll check whether you have paid things on time and stuck within your limits.
The type of credit check will differ from lender to lender. Every lender uses their own approach, but there will ultimately be a credit check.
With the majority of lenders, an Agreement in Principle applies a ‘soft’ credit search to your credit file, and that has no impact on your credit score at all. Some lenders do a hard credit search at Agreement in Principle stage, which can impact your score.
But obviously, your advisor would make you aware of the type of credit search that will be applied before any Agreement in Principle is done. Nothing would ever be submitted without the client’s consent.
How do I apply for an Agreement in Principle if I’m self-employed? How long does this take?
An Agreement in Principle is something your advisor would do on your behalf. It isn’t necessarily something you need to worry about, as we’re here to take the work out of your hands.
The timeframe will differ, again, depending on the lender. Some use technology that will issue a decision instantly, while others are more manual – one of their underwriters will have a look at the case and give a decision.
That could take up to a few days based on current timescales (in June 2025). Again, your advisor will let you know exactly how the lender works and when you can expect an update.
You’ve demonstrated how a mortgage broker can help, but is there anything else we need to know here?
A mortgage advisor is there to ensure you’re applying for the most suitable mortgage based on your individual circumstances – and those vary significantly from person to person.
With such a wide range of lenders and products available, it’s obviously in your interests to make sure you’re getting the best outcome possible. This is essentially where a mortgage advisor steps in – to guide you in the right direction.
If anyone listening has any queries or further concerns, we’re always here and happy to help.
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT.
THERE MAY BE A FEE FOR MORTGAGE ADVICE. THE PRECISE AMOUNT OF THE FEE WILL DEPEND UPON YOUR CIRCUMSTANCES, BUT WILL RANGE FROM £99 TO £549 AND THIS WILL BE DISCUSSED AND AGREED WITH YOU AT THE EARLIEST OPPORTUNITY.
ASSET HARBOUR MORTGAGE AND PROTECTION LIMITED TRADING AS ASSET HARBOUR MORTGAGE AND PROTECTION ARE AN APPOINTED REPRESENTATIVE OF HLP PARTNERSHIP LIMITED, WHICH IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
