Self-Employed Mortgages with One Year’s Accounts
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Self-Employed Mortgage with One Year’s Accounts
Is it possible to get a mortgage if you’ve only been Self-Employed for one year?
With some specialist independent lenders, it’s perfectly possible to obtain a mortgage offer with one year’s worth of accounts, as a Self-Employed applicant. Whilst you will find that most high street lenders are unable to help you, contacting Mortgage Brokers like ourselves to help you locate the type of specialist lender you need, will help you to achieve your goal.
It’s worth considering that although possible, mortgage products offered under these circumstances will not have as competitive interest rates as others. In some cases, you may benefit from delaying your application for a year to access better rates, however, we can help you to decide this based on your individual circumstances.
How do I prove my income with one year’s accounts?
Applicants in certain careers, such as those which require professional qualifications, will find that there is more flexibility in terms of the length of their current employment than others. A doctor, for example, may be able to get a mortgage before they begin their first qualified post.
In other industries it can be challenging to prove your income when you only have one year of accounting history available. Some lenders will request further evidence of your income stability, such as a business plan and future income projections, to back up your proof of income. The proof of income required will depend on the Self-Employed work you carry out.
Limited Company Director
Personal salary and dividends are considered for Limited Company Directors and less frequently, their net business profits. To prove this income you will need:
- Certified accounts for your trading history
- SA302 form for the same duration
- Business banking statements are also required in some cases
Sole Trader / Freelancer
Sole traders will have their mortgage application assessed based on their personal annual income. To prove your income, you will need to supply your SA302, although, as mentioned above, further evidence of stability is also likely to be required. A written contract agreement with clients can be useful.
You need to own at least 25% of the business you partner in, in order for your income to support your mortgage application. Your share of the net profits from the latest year is used and to prove this you will need to show:
- SA302 form for the year in question
- Business bank statements for the same duration
How much can I borrow?
Ordinarily, how your income is earned should not affect the amount you can borrow. The lender will, however, want to be comfortable that your income is stable, so having a shorter history of trading can mean that they offer you a lower multiple of your annual income, to mitigate some of their risk.
Around four and half times your annual income is a standard mortgage offer, however, this will fluctuate based on your credit score and the perception of stability of your income.
What deposit will I need?
For most Standard Residential Mortgages, you will require a 10% deposit, however, as a Self-Employed applicant with only a year of accounts available, you would benefit from offering more than the minimum deposit, if you can afford to do so.
Do I have access to the Help to Buy scheme if I’m Self-Employed with one year’s accounts?
The Help to Buy scheme and other similar home ownership schemes were designed to assist those applicants who are unable to obtain a mortgage offer for a standard mortgage. They are therefore an option to consider if you don’t meet the lender criteria for a Standard Residential Mortgage.
The scheme lends you a government loan of up to 20% of the property value to be used as a deposit. You only need to provide the first 5% yourself, which means that you could have a deposit of 25% (45% in London). This reduces the Loan to Value of your borrowing to 75% or 55% respectively. This could therefore make a mortgage more easily attainable for you, due the reduced risk to the lender.
How can Fancy a Mortgage help?
Here at Fancy a Mortgage, we have helped many Self-Employed borrowers with a wide range of circumstances to find a suitable mortgage. If you have only been trading for a year, speak to our advisers about the potential to find a competitive mortgage. We can advise you whether you would be better to try again in a year’s time or we are able to find you a competitive deal straight away.
Your home may be repossessed if you do not keep up repayments on your mortgage.