Self-Employed Mortgage with One Years Accounts
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Self-Employed Mortgage with One Year’s Accounts
When you’re Self-Employed you might worry that it will be more difficult to get a mortgage – especially if this is a new career move for you. You’ll often hear that you need two years’ accounts to be considered for a mortgage, but some lenders will accept people with less. We’ll help you explore Self-Employed mortgages with one year’s accounts.
Can you get a mortgage if you have been Self-Employed for one year?
Getting a mortgage is all about showing the lender that you can afford to pay back their loan. For an employed person, it is very simple – you just show them how much you earn.
For the Self-Employed it can be a little more complicated – mainly because your income is more variable.
So a lender will want to see how your business is performing and what your annual earnings are like. Many mortgage providers want to see at least two years’ worth of accounts to give them this understanding.
A few specialist lenders will approve you with just one years’ accounts, however. Some will even accept 9-10 months’ business records – but your business will need to be performing really well.
How do I prove my income with only one years’ accounts?
Each lender will have their own unique criteria and requirements from a Self-Employed applicant.
You will often need to show a set of accounts as part of your mortgage application, certified by a qualified accountant. Your accounts should include full financial details for the latest year including profit, loss, salary and dividends. Lenders might also request your self-assessment tax return (SA302) as this gives a good indication of your annual earnings.
You can also expect to have your credit score scrutinised. If you have had any credit problems in the last six years you could find it harder to find a lender offering good rates.
Is there a difference if you’re a Sole Trader, in a partnership or have a Limited Company?
If you’re a sole trader or in a partnership, lenders often look for the net profit in your accounts or the ‘total income received’ on your tax return. For a partnership, you will be assessed on your share of the profit – which might mean you can borrow less than you were hoping.
Where you have a limited company, the mortgage company may look at your finalised accounts and base the loan amount on the stated salary and dividends. Some lenders will also include your net profit – and this usually means you can borrow more.
How much can I borrow?
A lender will usually offer a Self-Employed borrower around four to five times their income as the total loan amount. It’s very important to make sure that the monthly repayments are comfortably affordable.
Being Self-Employed is more risky than a traditional employed job – especially because your income varies and there is no sick pay. It’s worth considering whether you will need a contingency fund to pay the mortgage if you’re unable to work due to illness or injury.
Alternatively, you could consider income protection products which pay out on a monthly basis.
What deposit will I need?
While the minimum deposit tends to be around 10% of the property value, if you can put down 15% or more you will get better rates and a wider choice of lenders. Some 5% mortgage deals are available, but remember that this will make your monthly payments considerably higher.
Can I get Help to Buy if I am Self-Employed with one year’s accounts?
There are various government Help to Buy schemes, designed to make it easier to buy a home. These include the option to buy a home with just a 5% deposit. An Equity Loan lets you take out an interest-free loan from the government to put down a bigger deposit. With Shared Ownership, you part-rent, part-buy a property.
You can access Help to Buy if you are Self-Employed, even if you only have one years’ accounts. The trick is to find suitable lenders – which is where Mint can help you.
How can a Mortgage Broker help?
As experienced mortgage brokers, we’re here to give professional mortgage advice and support throughout the purchase process. We compare hundreds of mortgage deals on your behalf, from high street lenders to more specialist brands. We’ve helped many Self-Employed people find a mortgage to suit them and help them buy their dream home.
We are an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority, so you can trust us to take the stress out of getting a good mortgage deal.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
We may charge a fee of up to £395 for mortgage advisory services and administration.