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Self-Employed Mortgage with One Year’s Accounts
If you’re newly Self-Employed, with only one year’s worth of accounts, you may be worried you’ll struggle to find a mortgage lender.
In fact, you may have heard it’s hard to get a mortgage if you’re Self-Employed, compared with employed people, even if you had the required three year’s worth of accounts.
Well, we’re here to knock those myths on the head. As a Self-Employed worker, you represent 15% of the UK workforce, that’s around five million people in the UK today.
We’re pretty sure a significant number of those will be homeowners who successfully applied for a mortgage while being Self-Employed.
Can I get a mortgage if I’ve been Self-Employed for one year?
Absolutely yes, there are specialist lenders that offer mortgages to business owners who have just started working for themselves.
The information asked for will depend on the lender’s criteria. In addition to your first year’s finalised accounts, they may want to know about assets you own, your income forecast, and past employed income.
Gathering all this information may prove difficult. However, the key to a successful mortgage application is to work with an experienced Mortgage Broker who knows what lenders are looking for.
This is in preference to approaching a high street bank or building society on your own and risk rejection.
How do I prove my income with one year’s accounts?
Are you Self-Employed as a sole trader, or do you run a limited company, or are you a contractor, a partner in a business or a combination of both?
If you fall into any of these categories, you’ll need a set of business accounts for the latest tax year, drawn up by a qualified accountant.
However, if you have been trading for less than a year, you can still apply for a mortgage in principle so you have more time to prepare.
Self-Employed Sole Trader
If you work for yourself as a sole trader, you will be registered as Self-Employed with HMRC.
If you or your accountant submitted your Self Assessment tax return in the last tax year running 6 April 2019 to 5 April 2020, you will have one year’s worth of finalised business accounts and an SA302 form.
This simple form may be enough proof of income to satisfy a lender, especially if you have a good credit score and a previous employment record showing a steady past income stream.
If you own a limited company, a lender will be interested in your company’s net profit and assets. They will also want proof of your annual director’s salary and dividends drawn from the business, which will be shown in your finalised set of limited company accounts for the latest tax year.
If you are a partner in a business, a lender will want to see your latest year’s accounts and your personal share of profits as well as your personal payslips and dividend drawdowns.
How much can I borrow?
The amount you can borrow is calculated at five times your proven annual income, in the same way as for employed borrowers. The amount will also depend on the underwriter’s affordability assessment based on your monthly outgoings.
How much deposit will I need?
The higher your deposit, the better. It will widen the choice of lender and lower interest rates. Although you may find offers for smaller deposits, 10% of the house purchase price is the minimum most lenders will expect.
Can I get Help to Buy if I’ve only been trading for a year?
Yes, the Government’s Help To Buy scheme is available if you’re Self-Employed with one year’s worth of accounts.
The scheme offers you the opportunity to buy a home with only a 5% deposit. This means you won’t need to find the larger deposit you’d be expected to put down if you go down the regular mortgage route.
However, you will need to have a good credit score, so it’s worth checking your credit file for any adverse or bad credit flags on your record, so you can fix them before you apply.
How can The Mortgage Advice Centre help me?
We are authorised and regulated by the Financial Conduct Authority (FCA) and our office is registered in England. This means we are qualified to offer you mortgage advice.
We know what it’s like running a business while trying to deal with important, but time consuming, personal priorities, like finding the right mortgage lender. That’s why working with us will save you a great deal of time.
Our job is to work with you to find out how much you need to borrow in relation to your income, and help you prepare all the documentation you need to support your application.
After we’ve gathered all the paperwork, we will approach the lenders we know deal with Self-Employed mortgage applicants who have only been trading for a short period of time.
We’ll keep you informed every step of the way during your mortgage approval phase, so you can get on with the business of running your business.
Contact us now to arrange an initial chat.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP YOUR REPAYMENTS ON YOUR MORTGAGE