Can I Get a Self Employed Mortgage With 1 Years Accounts?

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Author: Elliott Culley - Director & Mortgage Adviser of Switch Mortgage Finance

If you’ve recently started a business or decided to become self-employed in the last year or so, you may ask yourself the question: can I get a self employed mortgage with just 1 years accounts?

Going self employed is one of the toughest and most daunting decisions you can make in your life. It can be difficult obtaining a self employed mortgage at the best of times.

You want to ensure you speak with the self employed friendly lenders, whislt not wasting time approaching the wrong lenders.

Can I Get a Self-Employed Mortgage With Only 1 Years Accounts?

Yes it is possible to obtain a mortgage with just 1 years accounts. You need to make sure you approach the right lender from day one.

You may have been told mortgage lenders need you to have been self-employed for at least 2-3 years before they’ll offer you a mortgage. 

However there are lenders who will accept self-employed applicants with 1 years accounts. These lenders are usually intermediary only, meaning you can only access them through a mortgage broker. Self employed clients who work in the following industries; dentists, doctors, accountants, solicitors, engineers, actuaries and architects would have access to professional mortgages which offer more flexibilty. Lenders are more likely to offer mortgages to clients who have just gone self employed in these professions because mortgage lenders see these professions as more stable.

Sole Trader to Ltd Company

You may have decided to move from sole trader to limited company for tax purposes. Even if you have been running the exact same business for 10 years, if you change trading structure to a limited company, some lenders will consider it a brand new business. If you need a mortgage you’ll be asked to show 1-3 years’ worth of accounts for the company. Not great if you only incorporated six months ago. But there are options and thankfully not all lenders are the same. There are some lenders that will take a more pragmatic approach by assessing your mortgage application based on how long you’ve been running your business not on the trading structure. These lenders will require confirmation that you have stayed in the same line of work for certain period of time and will ask for evidence of this via your last 2 years tax calculations from when you were a sole trader.

Employed to Self Employed

It is possible to obtain a self employed mortgage with just 1 years accounts provided your self employed role is in a similar line of work to your previous employed role. There are mortgage lenders who will ask for a track record of previous earnings in your employed role. They will partner this with a projection for your first year from a qualified accountant/tax calculations. Provided the new role is similar to the employed role, the figures stack up and the mortgage amount is affordable there are mortgage lenders willing to take a common sense approach to help prospective borrowers.

Contractor Income

If you are a self employed contractor some lenders will accept the last 6 months payslips instead of an SA302. These can assist you in obtaining a mortgage if you only had 1 years accounts or even less than a years accounts.

How Much Could You Borrow With Only 1 Year’s Accounts?

A normal starting point for self employed would be 4.49x your annual income. This will give you an indication of how much you can borrow. Any credit commitments or dependents will reduce the borrowing amount. Depending on your annual income or whether you are classed as a professional applicant, it may be possible to reach higher borrowing multiples with enhanced loan to income ratios offered. The figure that is used to calculate your income as a sole trader will be your salary and dividends. For limited companies, the way lenders calculate your income can vary significantly. Some use salary plus dividend, others will use profit before tax plus salary. Some will simply assess profit after tax plus salary. If you have retained profit in your business, your borrowing capacity can vary from lender to lender, depending on which of these calculations is applied. Applying to the right mortgage lender is crucial and will depend on your individual set up. If your 2nd year’s income will be much higher than your first year’s, it may be possible to find a lender who will consider an application calculated on a projection. The projection could assist in increasing your borrowing ability. The projection will need to be confirmed by a qualified accountant.

Speak to an Expert!

elliott-culley-mortgage-adviser- director-of-switch-mortgage

Contact us today for expert advice and guidance on your unique mortgage and property needs. We will work with you on a one-on-one to basis to help you find the right solution for your needs.  

With our experience you can rest assured that you are in good hands when it comes to securing the financing you need for your property.

I Have Been Trading For Longer Than a Year But Less Than 2 Years?

It can be frustrating to be labelled as only having 1 years accounts when you have been trading for far longer than a year. If you have been self employed for longer than a year but less than 2 years, some lenders may ask for a projection for your 2nd year. This would need to be completed by your accountant.

This way a lender can gain some comfort over your income figures and could help you secure a mortgage.

Why Is It More Difficult To Get Approved For a Self Employed Mortgage With Only 1 Year’s Accounts?

It’s more difficult because mortgage providers will see the uncertainty of your future earnings as a risk. They won’t be able to calculate with confidence, how affordable a mortgage is for you.

However it is certainly possible to obtain a mortgage provided you apprach the right lenders.

What If You’ve Been Trading For Less Than 1 Year?

If you have been trading for under 12 months, it is highly unlikely that you will find a provider which will consider your application without the help of expert advice. Lenders require evidence of your income and if you are not able to produce 1 years accounts or a self-assessment form there is little evidence for a lender to base your income off.

However, depending on the type of role you carry out there maybe lenders who can consider you for a mortgage. They are situation-specific but you may be eligible for these mortgages, provided you can obtain a projection for your first years accounts. 

Can I Get a Self Employed Mortgage With 1 Years Accounts? Switch mortgage finance. Whiteley and fareham mortgage broker.

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