Running a business from home offers flexibility, independence, and lower overheads, but it can also raise questions when it comes to applying for a mortgage. Many home business owners worry that being self-employed or working from home will make it harder to secure a mortgage or limit their options.
In reality, it is entirely possible to get a mortgage while running a home business. However, lenders assess applications differently compared to those from salaried employees. Understanding how your business setup affects a mortgage application can help you prepare properly and avoid unnecessary delays or rejections.
Self-employment and mortgage applications
From a lender’s perspective, running a home business usually means you are classed as self-employed, even if you operate as a sole trader, limited company director, or freelancer.
This does not prevent you from getting a mortgage, but it does change how your income is assessed. Lenders want reassurance that your income is sustainable, consistent, and sufficient to cover mortgage repayments alongside other commitments.
How lenders assess income from a home business
Unlike employed applicants, home business owners are rarely assessed on a single payslip. Instead, lenders typically look at income over a longer period to understand stability.
Depending on how your business is structured, lenders may assess:
- Net profit for sole traders
- Salary and dividends or salary and share of net profit after tax for limited company directors
- Retained profits in some cases
Most lenders ask for two to three years of accounts, although some will consider applications with one year of trading history, particularly if income is strong and the wider financial profile is healthy.
The importance of consistent earnings
Consistency matters as much as headline income. Fluctuating profits are common for home businesses, but large drops or irregular income patterns can raise concerns for lenders.
If your most recent year shows lower income than previous years, lenders may:
- Average your income across multiple years
- Base affordability on the lower figure
- Decline the application if volatility is significant
Preparing your application at the right time, when accounts present your business in the best possible light, can make a noticeable difference.
Business expenses and affordability
One advantage of running a home business is that expenses are often lower than those of traditional businesses. However, lenders still examine outgoings carefully.
They may consider:
- Business-related costs
- Personal household expenses
- Existing credit commitments
It is important that your accounts accurately reflect your financial position. Aggressively minimising profit for tax purposes can sometimes reduce borrowing capacity, even if cash flow feels comfortable day to day.
Working from home and property use
Using your home as a place of business does not usually affect mortgage eligibility, provided the property remains primarily residential.
However, lenders may ask questions if:
- A significant part of the property is used exclusively for business
- You regularly see clients at home
- The business activity could affect insurance or planning permissions
In most cases, desk-based or online businesses cause no issues, but it is always best to be transparent during the application process.
Credit profile and business owners
Credit history plays an important role in all mortgage applications, including those from home business owners.
Lenders typically review:
- Personal credit history
- Existing loans or credit cards
- Payment history and outstanding balances
Keeping personal and business finances well organised, and avoiding unnecessary credit in the months leading up to an application, can help strengthen your position.
Deposit size and loan-to-value
A larger deposit can significantly improve mortgage options for home business owners. Higher deposits reduce lender risk and may compensate for income variability.
If your income is less predictable, saving a larger deposit can:
- Improve approval chances
- Unlock more competitive rates
- Increase lender choice
Even a modest increase in deposit size can make a difference.
Preparing before you apply
Good preparation is key for home business owners considering a mortgage.
Helpful steps include:
- Keeping accounts up to date and professionally prepared
- Maintaining clear separation between business and personal finances
- Avoiding major financial changes before applying
- Planning applications around strong trading periods
Understanding how lenders view self-employed income allows you to approach the home search process with confidence.
Why specialist advice can help
Mortgage criteria for self-employed and home business owners vary widely between lenders. What one lender declines, another may accept under different criteria.
Many business owners choose to work with mortgage advisers experienced with self-employed borrowers, who understand how to present income correctly and match applications to suitable lenders. This can help avoid unnecessary rejections and reduce stress during the process.
Final thoughts
Running a home business does not prevent you from getting a mortgage, but it does change how your application is assessed. Lenders focus on income stability, affordability, and transparency rather than employment status alone.
By understanding what lenders look for and preparing in advance, home business owners can approach mortgage applications with confidence and secure deals that support both their business and personal goals.
About the Author
Jeremy Davidson works closely with mortgage advisers across the UK as National Account Manager at Mortgage Adviser Directory, and has a strong interest in helping self-employed and home business owners navigate the mortgage process.
