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Self-employed mortgages with 1 year’s accounts

Getting a mortgage when you’re self-employed can be a little trickier than if you are in a salaried position. A lender is required by regulation to ask for proof of income in order to determine whether you have the ability to repay a loan.

This means you provide details of your accounts, typically from the last two or three years. But, what if you haven’t been trading that long?

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Author: Carl Shave - CEO and co-founder
Last updated: 16 May 2024

Can I get a mortgage with 1 year’s accounts?

The short answer is yes, however this doesn’t mean it will be straightforward. It will depend on the lender you use.

Most lenders will ask you to provide 3 years of accounts, often certified by an accountant. However, we know that this is not possible for everybody, but the good news is there are lenders available to help.

With 1 year’s of accounts, a lender will ask for much more information. They may also ask for projections, assets, and information about your employment before you started your own business. Your previous income and employment history will be considered in the underwriting process as well.

Providing a larger than average deposit or level of equity to invest in the property will help the lender to feel more comfortable with the risk of lending to you. Showing your commitment to the mortgage in this way may also secure a better interest rate.

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Useful Information

Specialist mortgage lenders for the self-employed

Although some high street lenders will consider lending to self-employed people with only 1 year’s accounts, other lenders have more narrow criteria. Therefore, you might need to consider applying to one of the niche-market specialist lenders available.

These lenders have geared their assessments and criteria around borrowers whose needs are not met by the high street banks. They might not be huge financial risks, but they need to be viewed in a different way.

Some examples of those who have been operating for several years and who are willing to consider self-employed applicants are:

At Just Mortgage Brokers we work with all of these and more in our efforts to find the right mortgage for self-employed people. As a result of our expertise and relationships, we not only have access to exclusive products only available through these lenders, but also to any new specialist lenders entering the market.

If you have been declined by high street lenders, fill out our online contact form to schedule a free, no-obligation consultation.

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Proving my income with 1 year's accounts

Lenders will usually use either your accounts or your self-assessment SA302 year-end tax calculation as evidence of your income. If using your accounts, most will require them to have been prepared by a certified or chartered accountant.

Whether you are employed or self-employed, you can normally borrow a maximum of the equivalent of 5 times your proven annual income.

Although some lenders may consider less, such as the equivalent of 4 or 4.5. With 1 year’s accounts, you may be required to have a deposit of at least 10% (or equivalent equity, if remortgaging) and the lender will look for a good credit history.

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Self-employed mortgages using last year’s accounts

Just like getting a mortgage with 1 year’s accounts, obtaining one with last year’s accounts is the same. It is possible to do so, although it can be a little more challenging for some.

If your business has switched trading styles, there is no reason it will negatively impact you.

You will still need to show that your income up to you switching trading styles was consistent. Then if the lender believes you earn enough money from the business and you pass their assessment criteria, there is no reason why you won’t be accepted.

 

Specialist self-employed mortgage advice

The specialist advice offered by those such as our team at Just Mortgage Brokers will give you the best possible chance of securing the mortgage you need.

A deep knowledge of the network of specialist lenders across the UK is essential.

This will mean you get unbiased, reliable recommendations on which lenders will be the best fit for your needs and circumstances. As well as guidance on how to make your application as strong as it can be, we’ll often spot problems or mistakes that you will not have realised exist.

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Frequently asked questions

Yes, you can but it will be challenging. The nature of the bad credit event, and how much time has passed since it occurred will be a big factor.

Smaller credit events like missed payments on a phone bill, won’t carry much weight, especially if they occurred several years ago.

However, more serious events like defaults that have occurred recently will make it much more challenging.

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It’s possible the amount you can borrow may be increased under specific circumstances, for example, if you have an especially high income.

Or, if you’re well into your second year of trading and having a better year, you may be able to boost your borrowing based on your accounts for the current tax year. Although, this will depend upon the underwriting policies of the individual lender.

For example, if your income in your finalised accounts for the previous year’s trading was £30,000, but you’ve already hit that figure nine months into the current year, a lender may be prepared to accept projected figures provided by a qualified accountant when deciding how much to lend.

That could make a difference between being able to borrow the equivalent of 5 x £30,000 (£150,000) and 5 x £40,000 (£200,000).

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Just like getting a mortgage when you are self-employed, it’s also possible to remortgage using just 1 year’s accounts. The process will be the same as if you were employed. Although, there may be a stronger case for sticking with your current lender. This is because they will already know that you are keeping up with mortgage repayments and have access to your history as a borrower.

If your current lender is a mainstream provider, you could hit a stumbling block if you no longer meet their lending criteria. In some cases, they might also ask more questions about your income.

It may be easier to get a better interest rate if you’re simply looking for a better rate, as opposed to consolidating debts or withdrawing equity. Regardless of your situation, reach out to us at Just Mortgage Brokers for advice.

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