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Mortgages with One Years Accounts

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Self-Employed Mortgages with 1 Year’s Accounts

In the days of self-certification, when applying for a mortgage a self-employed person could simply give a statement about their earnings for the lender to use as a basis for awarding it. Since that option was removed in 2011, getting a mortgage when you’re self-employed became a little more challenging, but it is by no means impossible.

Regulations require mortgage lenders to ascertain an applicant’s proof of income, to show they are lending responsibly and that the borrower is able to repay the loan. Some lenders do this by requesting three years’ worth of business accounts, which can be a problem if you’ve only been trading for a year. Fortunately, there are lenders who will be willing to offer a mortgage based on just one year’s accounts–you might need to shop around, or talk to a specialist mortgage broker, but deals to suit your circumstances are available on the market. Carry on reading to find out more.

Getting a Mortgage with  1 Year’s Accounts

It is possible to get a mortgage with one year’s accounts, although it’s not the easiest task. Lenders willing to consider providing a mortgage in these circumstances will typically ask for a lot more background information than your accounts–they will be interested in how long you have been working in your trade in total prior to being self-employed, whether previous jobs have been similar to your business now, and your previous income level through that work. All these and more will play a part in the underwriting process and give a guide to your income ongoing.

Lenders will also give more weight to the loan-to-value (LTV) ratio–if you are able to put down a larger than average deposit, or already have a lot of equity in a current property, then they will feel more confident about their perceived level of risk in the mortgage.

 

1 Year's Accounts Information

Proving my income with 1 year's accounts

As evidence of your income, mortgage lenders will typically refer to your business accounts and/or may also use your SA302 year-end Tax Calculation form (and accompanying breakdown) from HM Revenue & Customs. They will usually need accounts to be prepared by a certified or chartered accountant.

How much can I borrow with 1 year's accounts?

Your level of borrowing will not be determined by the duration of your accounts period, but more by what the lenders feel is your verifiable income, whether you are self-employed or in full-time employment. Once this has been ascertained, lenders will typically lend between 3.5 to 5 times your annual income. As a self-employed person with one year’s accounts, lenders will be looking for a deposit of at least 10% of the property value, and a clean credit history from the last six years.

What if I want to borrow more than would generally be offered?

Borrowing more than the usual multiples of annual income might be possible, in certain circumstances. If you have an especially high income, or you can show your ability to repay, then it can be possible to increase the amount you can borrow.

Another way for the borrowing limit to be increased is to show a significant improvement in your business income. If you are quite far into your second year of trading and having a much better year than previously, then it could be possible to use your current figures, even before they have been submitted to HMRC, to make a case to boost your borrowing.

For instance, if your previous year’s income was £30,000 and you have already hit that sum after only 9 months of the current year, then you might be able to use projected figures provided by a qualified accountant as proof of a larger income for the lender to use in calculating how much to lend. This could make the difference between being able to borrow £150,000 (five times £30,000) or £200,000 (5x £40,000), but much will depend on an individual lender’s underwriting policies.

Can I remortgage with 1 year's accounts?

As with obtaining a normal mortgage, it can also be possible for a self-employed person to remortgage using just one year’s accounts. A number of lenders have become more flexible in their approach and moved away from the traditional view that self-employed borrowers should have at least two or three years’ worth of accounts in order to be trusted with a mortgage.

Can I get a Help to Buy mortgage with 1 year's accounts?

As with other types of mortgages, it is possible for self-employed people to obtain a mortgage under the Government’s Help to Buy: Equity Loan scheme, even with just one year’s accounts, in the right circumstances. Help to Buy exists to enable people to enter home ownership by extending a loan to cover part of the mortgage on a new-build home interest-free for the first 5 years.

The mortgage market has evolved to meet changing market demands in recent years, and although still regulated to ensure responsible lending, many lenders are more flexible than they were before and will take your wider circumstances into account when considering whether and how much you can borrow. Our expert team at The Mortgage Centres has in-depth knowledge of the market and access to the specialist lenders who are willing to lend to self-employed people looking to buy under the Help to Buy scheme.

Specialist Self-Employed Mortgage Advice

At The Mortgage Centres, we know that most people, especially the self-employed, do not fit into the blanket approach to mortgage suitability taken by most mainstream lenders. You are likely to find much better results and more suitable products by talking to a mortgage broker who understands your circumstances, and will know exactly which lenders to approach to get you the mortgage you need.

Fortunately, a number of high street lenders are now more open to dealing with mortgage applications from self-employed people with one year’s accounts. To find out what options you might have for a mortgage and arrange a free consultation to go over all your circumstances, please call our team on 0330 094 5876, or drop us a line via our Contact form.

Frequently asked questions...

  • Can I get a mortgage with 1 year's accounts if I have bad credit?
  • Who are the best lenders with 1 year's accounts (specialist)?

Much will depend on the nature of the bad credit event, and how long ago it occurred. A few late payments on credit cards or store cards, even in the last year, might not prejudice the lender against your application, especially if you show a strong current financial situation. However, any mortgage arrears, defaults or county court judgements (CCJs) against your name within the last two years might preclude a lender from offering you a mortgage.

You might be surprised to learn that there are now a few high street lenders who are now willing to lend to self-employed people with one year’s accounts, but if for whatever reason you do not meet their criteria, there are also a number of specialist mortgage lenders who are likely to be able to help you.

Some examples of the companies who have been operating in the specialist mortgage market for a number of years are Aldermore, Bluestone, Precise Mortgages, Pepper Money and Kensington, and they are all willing to consider applications for mortgages based on one year’s accounts.

Not all mortgage brokers will have access to these specialist lenders, but at The Mortgage Centres we work with all these and others in our efforts to find mortgages for those in niche markets not served by conventional services. And due to our expertise and relationships, we also have access to exclusive products only available through these lenders, as well as trusted access to any new specialist lenders entering the market.

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