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.