Self-Employed Mortgages with One Year’s Accounts
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Self-Employed Mortgage with One Year’s Accounts
When a lender receives a mortgage application, the first thing they need to establish is whether you can afford to repay the loan. It’s easier for employed borrowers because all they need to prove their salary are payslips.
However, unlike employed people, proving your income when you’re self-employed isn’t quite so simple, especially if you only have one year’s worth of accounts.
It’s true most lenders prefer two years of accounts before accepting an application, however, if you’ve only just completed your first year of trading and want to buy a property, don’t let that put you off.
Can I get a mortgage if I’ve been self-employed for one year?
Starting the process now by engaging a reputable, regulated Mortgage Broker like Pia Financial Solutions, will double your chances of securing a mortgage offer. However it will depend on a few factors:
- A consistent track record of work, turnover and profit
- Your latest year’s accounts prepared by a qualified accountant, or
- Your latest Self Assessment tax return (SA302 Form)
- A good credit score
- Modest expenditure
- Having a healthy deposit saved
- Finding a specialist lender prepared to accept your application
Ticking all of the above will give you a great head start, and if you don’t have all your ducks in a row yet, you can make a start now.
For example, if you know you have bad credit, you can improve your credit history by paying off outstanding debt. If you don’t use a qualified accountant, you should find one and if you haven’t saved enough for a deposit, start saving your spare cash.
Save time by using a Mortgage Broker to find a specialist lender for you. Unlike high street lenders, specialist lenders only accept applications via regulated Mortgage Advisers.
How do I prove my income with one year’s accounts?
This depends on how your business is set up for accounting purposes. You may be a limited company director, a sole trader, or operate a partnership.
A lender will want to see your last Self Assessment tax return plus your SA302 form as proof of income earned and tax paid.
The lender will ask to view your latest set of accounts prepared by a qualified accountant so they can see your share of the company profits.
You’ll be asked to submit your latest finalised company accounts, director’s salary payslips and dividend vouchers.
How much can I borrow?
This is based on your annual income, expenditures and credit history and calculated as part
of an affordability check carried out by the lender’s underwriter. If your credit rating is good, as a rule of thumb, you can usually borrow between four-and-a-half to five times your annual income.
If you’re a limited company director, money retained in your business, known as ‘net profit’, may be included in the underwriter’s calculation depending on the lender’s criteria.
How much deposit will I need?
A deposit is paramount to your mortgage application being accepted. With just one year’s worth of accounts, lenders will expect a higher deposit to lower the risk, so the bigger the deposit, the better.
These are the deposit bands mortgage lenders recognise. This gives you a figure to aim for when basing it on a property price:
- 10% to 15% is the usual minimum required
- 20% to 25% will raise your chances of being accepted
- 40% will enhance the quality of a mortgage offer
Can I get help to buy if I’m self-employed (trading for one year) with one year’s accounts?
Various schemes are available, especially if you’re a First Time Buyer. You may qualify for a 5% deposit mortgage under the Government Mortgage Guarantee Scheme, provided the property costs less than £600,000.
This scheme is seeing more 95% LTV mortgages coming back onto the market. There is also the new Equity Loan Scheme for First-Time buyers buying new-build properties.
Other schemes include Right to Buy and Right to Acquire if you rent a council-owned property, or shared ownership which is when you buy a portion of a property.
How can Pia Financial Solutions help me apply for a mortgage with 1 year’s accounts?
Choosing Pia Financial Solutions will help you be in the best position possible to increase your chances of securing a successful mortgage offer or ‘Decision in Principle’. Plus, we’ll deal with all the time-consuming paperwork and inevitable chasing on your behalf. This is invaluable when you’re running your own business.
Our initial meeting is at our expense, so speak to us soon and we’ll get things moving right away.
Here are five ways we can help you:
- We’ll save you time searching because we’ve already researched the market
- We have access to a panel of specialist lenders who welcome self-employed mortgage applicants with one year’s accounts
- We’ll approach them on your behalf, complete your application and submit it for you
- We’ll do all the chasing, keeping you informed every step of the way
- We’re on your side – saving you money and taking the time to get it right.
Pia Financial Solutions is fully authorised and regulated by the Financial Conduct Authority.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.