Mortgage One Year Accounts

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You will often hear that Self-Employed people need at least two years’ accounts to get a mortgage. If your business is fairly new, you might worry that you will be unable to buy a home or remortgage. But in fact various lenders accept people with just one years’ accounts and sometimes even less.

Can you get a mortgage if you’ve only been Self-Employed for one year?

A lot of mortgage lenders want to see two or three years of accounts from Self-Employed people because they need to be sure every client can afford to repay the mortgage loan. Income is often a lot more variable for the Self-Employed – it’s not like a typical job where you receive the same salary every month. The more business records you can supply, the better the lender will understand how much you earn. That helps them calculate how much you could potentially borrow. That said, a few specialist lenders offer mortgages with 1 years’ accounts. Some will even accept just 9-10 months’ business records in certain circumstances.

How do I prove my income with only one years’ accounts?

To get a mortgage offer you need to prove your income by giving the lender various documents to look at. As well as a set of accounts, certified by a qualified accountant, you usually need to submit the latest year’s self-assessment tax return (the SA302 form) which states your annual earnings. Mortgage Lenders also look at your credit score. Bad credit will not necessarily prevent you from getting a mortgage, but it will narrow down your choice of lenders.

What happens if I’m a Sole Trader, in a partnership or have a Limited Company?

For a Sole Trader your business profits and your income are seen as the same thing. Lenders tend to take proof of income based on your SA302 self assessment form. People in a partnership are assessed on their share of business profits – which can sometimes mean your borrowing is more limited than you thought. If you run a limited company, mortgage providers usually request your finalised accounts and base the loan amount on the stated salary and dividends. If you take a low base salary from the business, it is beneficial to find a lender that takes net profits into account, as this usually means you can borrow more.

How much can I borrow?

Mortgage Lenders calculate how much to lend you based on your annual income. They will usually offer around four to five times your earnings. It’s important to explore what the loan amount will mean in terms of monthly mortgage repayments, and make sure they are affordable. You can reduce the monthly payments by putting down a larger deposit – or by buying a less expensive property. Another thing to consider is how you will meet the mortgage payments if you are unable to work due to sickness or injury, as there is no sick pay for the Self-Employed. Many people who run their own businesses take out income protection, which provides a monthly income if you can’t work.

What deposit will I need?

The minimum deposit is 5% of the property price, but these deals may be harder to find among Self-Employed mortgages. Generally, a larger deposit will get you more competitive mortgage rates and a wider choice of lenders. Putting down 15% or 20% will unlock the lowest rates and mortgage fees.

Can I get Help to Buy as Self-Employed with one years’ accounts?

The Help to Buy Equity Loan scheme supports you to buy a home with just a 5% deposit, topping this up to 25% with a government loan to reduce your mortgage payments. Help to Buy only applies to new build homes, and the loan is interest free for the first five years. Help to Buy is open to Self-Employed borrowers, including people with just one years’ worth of accounts. How can a Mortgage Broker help? Assured is a friendly team of professional Mortgage Brokers. It’s our job to explore mortgage deals on your behalf, comparing products from high street lenders and more specialist companies that only sell via Mortgage Advisors. We work with many Self-Employed people to achieve their property plans and make the process stress-free. We’re there for mortgage advice and support at every step, from calculating how much you could borrow and helping with mortgage applications right through until you collect the keys to your new home. We are authorised and regulated by the Financial Conduct Authority, so give us a call today and see how we can help you find a good mortgage deal.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.