You’re not ruled out from getting a mortgage just because you’re self-employed. However, the way that you prove income is a little different from that of people who are paid by an employer.
- People in part or full-time employment will be asked to provide their payslips and P60s as evidence of their income.
- If you’re self-employed, you will be asked to provide your SA302 tax calculations and two to three years’ worth of accounts.
But what if you haven’t been trading that long? Can you still get a mortgage?
The answer is yes it’s still possible, however, there are many other factors that could lessen your chances. In this guide, we will go into further detail on getting a mortgage with only one year’s accounts.
Which self-employed people can get a mortgage with 1 years accounts?
Our experience is that most self-employed applicants can get a mortgage with only one year’s accounts, provided they meet the rest of the lender’s criteria.
Self-employed mortgage applicants can include:
- Sole traders
- Limited company directors
- Self-employed people with poor credit
- Landlords wanting a buy-to-let mortgage
- Self-employed people who are first-time buyers
- Self-employed people who want to remortgage for a personal or business investment
If you do only have one year’s accounts, however, it is our observation you will likely be ruled out of mortgages offered by most mainstream lenders but not all!
This doesn’t mean your mortgage chances are doomed as there are specialist lenders out there who will grant mortgage approval to self-employed borrowers who haven’t been trading for more than a year.
Can I get a mortgage if I have been trading for less than a year?
If you’re new to self-employment, you won’t be able to prove an annual income, so getting a mortgage can be a little bit harder.
To improve your chances, you should speak to a mortgage broker, such as ourselves. We have access to lenders who will consider self-employed borrowers who have been trading for just less than a year.
How can I get a mortgage with 1 years accounts?
With only 1 year’s accounts, you will be seen as a high-risk borrower so you might struggle to get a mortgage from most high street lenders.
But as we said, you can improve your chances of getting a mortgage by applying for a loan from a specialist lender. Speak to a mortgage broker to gain access to the lenders who will consider your position.
You can also take other steps to improve your mortgage chances.
5 steps that you can take to improve your chances of getting a mortgage
- Find ways to reduce your spending
- Minimise your outstanding debt
- Improve your credit score if necessary
- Save for a deposit higher than 10%
Secure long-term clients if you can
A specialist mortgage broker can give you more advice so if you’re currently looking for a mortgage, speak to a member of our team as we have years of experience working with customers who are in self-employment.
How much can I borrow for a mortgage with 1 year’s accounts?
Like most other applicants, self-employed borrowers are usually eligible to borrow an income multiple of up to 4.5 times their salary or annual income. As such, you can ask your lender to consider your income based on your one-year’s accounts.
If you have been trading for longer than one year but under two years and have increased your income after your first twelve months, then your lender might calculate your mortgage affordability using your first year’s income and the net profit of the remaining months. Should you find a lender willing to calculate your income this way, you may be eligible to borrow more, provided the lender is confident you have the ability to make your monthly repayments.
For an estimated figure of how much you may be able to borrow, search online for a self-employed mortgage calculator.
How can I evidence my income with just one year’s accounts?
If you’re a sole trader or in a partnership, a full set of your one-year’s accounts and your self-assessment tax return can be used as income evidence. When it comes to your accounts, you will usually need a certified or qualified accountant to verify these before you make your application.
If during the mortgage underwriting process, you want the lender to calculate the net profit of money earned after your first year but you don’t have a full second year’s accounts, you may be allowed to provide a set of incomplete accounts from that second year.
If you’re a company director, some lenders will base your affordability on your retained company profits. Others may base their assessment on your salary and dividends. You will need to provide evidence of these if required.
Can I get a self-employed mortgage if I have been trading for less than a year?
If you have been self-employed for less than a year, you won’t have an SA302 or a year’s worth of accounts.
Getting a mortgage will be much more difficult for you but some niche lenders will accept an application based on your income thus far. To access these mortgage lenders, get in touch with our team as we will put you in touch with the relevant lenders.
Should I delay a mortgage until I have been trading for 3 years?
Getting a mortgage with 1 year of finalised accounts is certainly possible but if you’re happy to wait until you have been trading for 3 years, then this can be advantageous for you.
Well, you have will more financial history for one thing, so more lenders will be willing to consider your application as they will be better able to assess your income and your ability to make your mortgage repayments.
If you can evidence a sustainable income over 3 years, you will also be eligible for more attractive mortgage deals.
But if you’re keen to remortgage, move, or get on the property ladder sooner, you don’t necessarily have to wait until you have 3 years’ accounts, as some specialist lenders may still be willing to consider you. However, you may be ruled out of the best mortgage deals on the market if you have been trading for less than 3 years.
Mortgage brokers can help you make the right decision so if you would like advice that is tailored to your situation, get in touch with our expert team.
Can I get a mortgage with 1 year’s accounts and bad credit history?
If you’re looking to acquire a mortgage with 1 year’s accounts and bad credit, the chances of mortgage rejection will be increased as many lenders will be unwilling to give you a loan.
However, this doesn’t mean it’s impossible as our mortgage brokers can give you advice and point you in the direction of the bad credit specialists who will accept your application.
Unfortunately, to qualify for a mortgage with a year’s accounts and a bad credit rating, you will usually need to save up for a larger mortgage deposit. This will be at least 15% of the property value of the house you are considering.
How can I improve my credit score?
If you have a bad credit score, you should do all you can to improve it before you make your mortgage application. This way, you may become eligible for mortgage deals at a more affordable loan to value as your lender will think you are less likely to fall into mortgage arrears.
5 ways you can improve your credit score
- Build your credit history (perhaps with the use of a credit builder card)
- Make your bill and loan payments on time (set up automatic bill payments so you don’t forget)
- Check for mistakes on your credit report
- Reduce the amount you owe on your credit cards and other loans
- Restrict applications for credit
For more information on improving your credit score, set up an account with one of the main credit reference agencies – Experian, Equifax, TransUnion, and Crediva – and check their pages for advice.
What happens if I am declined for a mortgage?
If your application has declined a mortgage, it might be because you have chosen a lender who doesn’t specialise in self-employed mortgages. You might also be declined if you have only one-year accounts, as many lenders needing evidence of a longer financial history will be unwilling to accept your current income.
However, these aren’t the only reasons why your application might be declined. If the lender doesn’t think you are a stable borrower because of…
- Your credit history
- Your impulsive spending habits
- Your other loans
- An unstable income
… these are also reasons why you might be turned down for a mortgage.
If your application form was filled out incorrectly or if you aren’t registered to vote, these are two other factors that can cause a lender to reject your application.
Whatever the case might be, you should get in touch with a mortgage expert who will give you the mortgage advice you need. Should you book an appointment with a member of our expert team, your appointed representative will consider your situation and advise you on why your application was rejected.
Are self-employed mortgages available for all business types?
Lenders base their assessment on risk rather than business types. So, even if your business is wildly different from the norm, you should still be able to obtain a mortgage provided you have a sustainable income and you have a proven track record of managing your finances during the months you have been trading.
YesCanDo are experts at choosing the best lenders for self-employed mortgages
If you’re a self-employed person wanting a mortgage with one year’s accounts, get in touch with our expert team. We have over 40 years of expertise in helping the self-employed get mortgages and will know the mortgage providers that are right for your own situation and give you all the mortgage advice and support you need on your mortgage journey.
Are specialist lenders better than high street lenders?
For self-employed mortgage applicants, the answer is typically yes for borrowers with a shorter trading history. This is because most lenders on the high street are unwilling to accept applications from self-employed people who have only 1 year’s accounts as evidence of their income.
Generally speaking, however, specialist lenders are no better than high-street lenders. They are all as credible as each other. It’s just that, in certain circumstances, specialist mortgage lenders are better suited to customers in tricky situations, such as people with bad credit or the newly self-employed who don’t yet have an annual business income.
If you require a mortgage with 1 years accounts, we will explore all of your options with you. We will consider both established lenders and new specialist lenders entering the market, and will let you know which is right for your situation.
Can I obtain a mortgage with two years accounts?
Yes, getting a mortgage with two years accounts is possible but once again, it is wise to speak to experienced mortgage brokers, as you will likely need a specialist lender for your self-employed mortgage.
You will also need to get your accounts signed off by a qualified accountant before you make your application.
Can I obtain a mortgage if I am 6 months self-employed?
Getting a mortgage with one year’s accounts is hard enough but if you don’t have figures related to an annual income, then it can be even harder.
This isn’t to say it’s impossible to obtain a mortgage but your choice of lenders will be very limited. We can put you in touch with a mortgage lender if you have been self-employed for less than a year so get in touch with our team for mortgage advice tailored to your situation.