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Recently self-employed with 1 years’ accounts?
At Rosehill we get lots of self-employed individuals asking if they need three years accounts to get a mortgage.
Fortunately, this is not necessarily the case.
It is possible in some circumstances to get self-employed mortgages with one year accounts!
It’s key to note that there are only a selection of lenders that will consider this.
We’d always recommend speaking with a great broker early into the process to get a better understanding, based on your specific circumstances.
In the meantime here’s a guide on mortgages for the self-employed with 1 years accounts!
Mortgages for the self-employed with 1 years accounts – can you get one?
Unfortunately there’s no straight yes or no answer to this question – many factors come into play.
Fortunately, although obtaining mortgages for the self-employed with 1 years accounts can be very tricky, the main thing is that it is possible.
Lenders will be focused on your ability to meet the monthly payments, so they’ll be carrying out an affordability assessment.
Providing this affordability assessment satisfies the lender, they can be flexible on the industry or occupation you operate within.
As you’re relatively new to self-employment, lenders are likely going to want to see that your previous experience aligns with your new business.
Where this is not the case, if you’ve started a new business and it’s completely separate from what you did in the past, lenders might not be comfortable enough to consider an application.
Reason being is if you started a new business in the same field that you were previously employed in, there’s usually a better chance that you’re going to see success in this new business.
At Rosehill, we take pride in building long-term relationships with our clients. We don’t see ourselves as just a mortgage broker, but rather a trusted partner who will be with you every step of the way.
At Rosehill, we take pride in building long-term relationships with our clients. We don’t see ourselves as just a mortgage broker, but rather a trusted partner who will be with you every step of the way.
Aside from the standard documents you’d need to apply for a mortgage, you’d need the following to prove your income:
1. Your Tax Calculation/SA302 and corresponding Tax Year Overview.
2. Certified company accounts (if Limited Company Director).
For your Tax Calculation, you can either get this from the Inland Revenue or from your accountant.
It will show the net profit from self-employment if you’re a sole trader.
Your salary and dividend figures will be shown if you are a limited company director.
In addition, this document will also show the amount of tax that is owed.
Lenders may also want to see your projections from your accountant for the following year, just to make sure that your business and your income is sustainable.
Mortgage lenders are generally going to want to see your latest three months’ personal bank statements.
They may request more or less, depending on your circumstances.
Lenders may want to see your company bank statements too.
We would always recommend keeping separate accounts for your business and for your personal use, as this will make things a lot easier for lenders to assess.
The amount you can borrow with 1 years’ accounts will still come down to the general checks that come with pretty much any residential mortgage application.
There’ll be a full affordability assessment – lenders will be looking at your income and expenditure to ensure they are comfortable that you can afford the repayments.
Other factors will also be taken into account, such as your credit file, your deposit size and so on.
It’s usually possible to secure a mortgage with as low as a 5% deposit.
However, a smaller selection of mortgage lenders will be available when compared to a deposit of 10% to 15%+ range, particularly if you’re looking to proceed with 1 year’s accounts.
Generally speaking, up to a certain level, lower interest rates become available at each 5% increment in your deposit (5%, 10%, 15% and so on).
A smaller deposit (i.e. 5%) also puts you at a higher risk of falling into negative equity.
Possibly, yes.
The Help to Buy Equity Loan can help you get onto the property ladder with only a 5% deposit.
For this scheme, the Government would offer a loan up to 20% (40% in London), which is interest free for the first 5 years, helping to boost your overall deposit for your purchase.
There are other schemes available, such as the Shared Ownership Scheme.
For this scheme you purchase a percentage of a property.
You’d then pay rent for the share of the property you do not own.
Both of these schemes are available to self-employed buyers with a 1 years’ worth of accounts available.
Having only 1 years’ accounts unfortunately isn’t something that all lenders are comfortable with.
Many lenders will want to see a longer track record before being comfortable to lend.
However there are some specialist lenders out there who have greater flexibility with this – have a chat to a broker about your options (we’d love to help!).
First of all, you want to make sure that you have your finances in check.
Mortgage lenders will want to be making sure that you have a healthy business.
To get a mortgage with only one years’ accounts you’ll want to make sure that you’ve had a full 12 months’ trading history.
You’ll also want to make sure that you have made a profit.
For limited company owners we’ll be looking at your balance sheet.
It’s all well and good if you’ve got turnover and profit, but if your liabilities outweigh your assets (i.e. the amount you owe outweighs the amount that you are owed), this can show the lender that your business could go bust at any point in time.
Liabilities outweighing assets can cause issues, as lenders want to make sure that your business is sustainable and stable.
Ultimately it comes down to preparation.
Preparation is key for anyone looking to buy a home or remortgage, but particularly where you’re looking to use your first year’s accounts.
We’d recommend speaking with a great broker who is well-versed in self-employed mortgages, early into the process, so that they can advise you on your specific circumstances.
We focus on building long-lasting relationships with clients.
We therefore charge a reduced fee for our existing client remortgages.
Click here for more detail.
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As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments. Think carefully before securing any other debts against your home or property. The Financial Conduct Authority does not regulate commercial buy to lets and some forms of commercial mortgages. You may have to pay an early repayment charge to your existing lender if you re-mortgage
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Rose Hill Financial Services Ltd is authorised and regulated by the Financial Conduct Authority. You can find us on the Financial Services Register https://register.fca.org.uk/ under reference 912303. Registered office address: 1 Bell Street, 2nd Floor, London, England, NW1 5BY. Registered in England and Wales. Company registration no: 11997519.
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