Self-Employed Mortgage with One Years Accounts
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Is it possible to get a Mortgage if you’ve only been Self-Employed for one year?
Using a specialist Mortgage Lender, it’s perfectly attainable for a Self-Employed person with only one years’ worth of accounts available to secure a mortgage. Lenders often require Self-Employed applicants to be able to demonstrate a two to three year history of accounts in their current role, in order that they can calculate an average basic income across that period.
There are a small, but increasing number of specialist lenders now offering mortgages to Self-Employed applicants with only twelve months of accounting history, however, there are likely to be other criteria to fulfill in order that they can satisfactorily mitigate their risk, and interest rates will also be higher in these circumstances.
How do I prove my income with one years’ accounts
As Self-Employed applicants ordinarily need to show a substantial history of stable income, proving your income can be difficult with just the latest year’s accounts available. Many lenders will require that you provide additional proof of a stable and maintainable income. A professionally drawn up business plan and future income projections are usually adequate for this purpose.
Depending on the type of Self-Employed activities you carry out, your mortgage will be calculated slightly differently and therefore the documents required as proof of income can also be different.
Limited Company Director
Your personal salary and dividends payments will be used to determine your loan affordability, as a business owner. There may be some specialist lenders who are willing to look at your net profits alongside the other income, however, this is less common. To prove your income, you will need to provide:
- Your accounts for the first trading year, certified by a qualified accountant
- SA302 form for this duration
- Business banking statements may also be required
If you are a Sole Trader or Freelance worker, your total annual income will be considered by the lender. This can be proved with your SA302, however, any additional proof of guaranteed future income that you can provide, for example, a contract from a client, will strengthen your application. Those in qualified professions may also be able to provide their professional certification for this purpose.
If you own at least 25% of the company you are a partner in, this source of income can be used to support your mortgage application. The Mortgage Lender will use your personal share of the net profits as your basic income. If you own less than that, unfortunately this will not be considered.
Documents required for proof are:
- SA302 for the latest financial year
- Business bank statements
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How much can I borrow?
Employment type does not usually affect the amount that you can borrow, but if your income is considered less stable, you may be offered a lower multiple of your annual income.
A typical applicant can borrow between three and five times their annual salary, however, those with less evidence of a stable income or with lower credit score will be lower down on the scale. This can vary based on your profession also, with those in qualified professions not considered as high risk as those who are not.
What deposit will I need?
A Standard Residential Mortgage usually has a deposit requirement of around 10%, although the Mortgage Guarantee Scheme has opened up access to 95% mortgages, which only require 5% deposit.
As a Self-Employed applicant with a shorter trading history, it will benefit you to offer more than the average deposit, if affordable. If the standard mortgage route is not viable, however, then you may benefit from a government home ownership scheme.
Do I have access to the Help to Buy scheme?
The Help to Buy scheme allows First Time Buyers to borrow up to 20% (40% in London) of the cost of their property as a deposit, providing they are able to provide the first 5%. This scheme was developed to help those struggling to get onto the property ladder through the standard route, so may be a promising option for you if you’re a First Time Buyer.
How can The Mortgage Company help?
Here at The Mortgage Company, have helped many Self-Employed borrowers to secure a mortgage, even those with just one year of accounting history available. Whilst high street lenders are not likely to be able to help you, we have access to a wide range of those specialised lenders who will consider your circumstances.
Let our Mortgage Brokers do the hard work for you, our extensive knowledge of the many varied lender criterias will allow us to match you perfectly with a lender, preventing the time, stress and disappointment of failed applications with the wrong lenders.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE