Mortgages for the Self-Employed – How to Improve Your Chances of Approval and Good Terms
Many self-employed people are sure it's harder for them to get a mortgage than it is for salaried employees. The truth is that a well-organized self-employed person, with a stable income and a file prepared in advance, can get a mortgage on excellent terms. The main difference lies in how the bank calculates your income – and in the preparation you do before approaching the bank.
How does the bank calculate a self-employed person's income?
For a salaried employee, the bank looks at pay slips. For the self-employed, the bank looks at net profit after tax – not at turnover. So the bank will usually ask for:
Income tax assessments for the last year or two
An accountant's certificate of income for the current year
Checking account statements for recent months (business and personal)
A breakdown of existing obligations and loans
The monthly income the bank will recognize is usually calculated as the average annual net profit divided by 12. That determines the monthly payment you can qualify for, and from that, the mortgage amount.
The common trap: too many recognized expenses
Many self-employed people work to reduce their reported profit so they pay less tax. That's legal and legitimate – but in the years before taking out a mortgage, a low profit on paper means low income in the bank's eyes and less money in the mortgage. If you're planning to buy an apartment in the next year or two, it's worth sitting down with your accountant and planning your reporting from this angle too.
5 steps that improve your chances of approval
Business track record – banks prefer a business that has been operating for at least one to two years. If your business is young, prepare an explanation of your previous experience in the field.
A clean checking account – no exceeded limits, bounced checks or permanent overdraft in the months before the application.
Separating business and personal – it's easier for the bank to understand the picture when the accounts are in order.
A documented down payment – the bank will want to see where your down payment came from and that it's in the account.
A file ready in advance – approaching the bank with all the documents ready conveys reliability and shortens the process.
How much mortgage can you get as a self-employed person?
The rules are the same as for salaried employees: up to 75% financing for a single apartment, up to 70% for home upgraders, and up to 50% for an investment apartment. What changes is how your income is calculated. To understand the full calculation, read the guide How Much Mortgage Can You Get and the article on mortgage financing percentages.
Why work with a mortgage advisor?
Each bank has a slightly different policy toward the self-employed: some banks make do with one tax assessment and an accountant's certificate, while others are stricter. A mortgage advisor knows the differences, knows how to present your file the right way, and runs the negotiations with several banks in parallel. It's also a good idea to start with a mortgage approval in principle even before you start looking for an apartment.
Since 2013 we have accompanied hundreds of clients – many of them self-employed people and business owners – and secured mortgages totaling more than half a billion ₪.
Book an introductory call – we'll review your situation together and build a plan tailored to you.
This article is for general information only and does not constitute personal advice.
