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Self-Employed Mortgage with One Year’s Accounts
It is less of a challenge for self-employed people to find a mortgage today than it once was. It’s mainly a case of having some documents ready – including a couple of years’ business accounts. If your company hasn’t been running long, a few lenders will also accept self-employed applicants with just one year’s accounts. We can help you find them.
Can you get a mortgage if you’ve only been Self-Employed for one year?
Generally mortgage lenders want lots of information to understand how much you earn and whether you’ll be a reliable customer.
Self-Employed people often see more variation in their income from month to month and year to year. So Lenders will want evidence of your annual earnings and often ask for two years’ worth of accounts – or more – to see how your business is performing.
A few specialist lenders will accept just one year’s accounts, and some will even take 9-10 months’ business records, if your company is performing well.
How do I prove my income with only one year’s accounts?
You will need to supply a few documents, including company accounts as certified by a qualified accountant. The accounts should detail your profit, loss, salary and dividends. Lenders may also ask for latest year’s self-assessment tax return (SA302) stating your annual earnings.
Your credit score will also be important. Any credit problems in the past six years might make it harder to find a lender, and more serious adverse credit can mean higher interest rates.
Is it different for a Sole Trader, a partnership or a Limited Company?
When you’re a Sole Trader there’s no legal distinction between your business and you as an individual. A lender will see your business profits as your income. Your SA302 self assessment form is usually the preferred way to assess your income.
If you’re in a partnership, lenders only accept your share of the profit as income. For some people this means the loan amount is lower than they’d hoped.
With limited companies, the lender will explore your finalised accounts. Some mortgage providers will base your loan amount on the salary and dividends – which can cause frustration if you pay yourself a low income and keep money in the business. But certain lenders will also include your net profit – which usually means you can borrow more.
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How much can I borrow?
The mortgage company will calculate your loan amount the same way as for an employed person – by taking your income and multiplying it by four, or sometimes five.
You could use a mortgage calculator to see what this might be based on the annual income from your tax return. Check that the monthly repayments are comfortably affordable, as your home is at risk if you fall behind with repaying the loan. However we advise that speaking to a qualified broker will help gain a better understanding of all the costs a lender will take into account.
How much deposit will I need?
Generally the minimum deposit is 5% of the property value, but if you only have a year’s accounts lenders may seek a larger amount. If you can contribute 15% or more you’ll get better rates and lower monthly payments.
Can I get Help to Buy as Self-Employed with one year’s accounts?
The Government introduced the Help to Buy schemes to help people get on the property ladder. The Equity Loan is open to those with just a 5% deposit who are buying a new build home. An interest-free 5-year loan from the government boosts the deposit up to 25% (45% in London). Self-Employed people are able to use the scheme, but finding a lender happy with just a year’s accounts may take some work.
Another option is Shared Ownership, where you part-rent, part-buy a property. Again this is theoretically available to the newly Self-Employed if you can find a mortgage provider. Fortunately, IMS Financial can do all that research for you.
Neither IMS (Watford) Ltd nor PRIMIS Mortgage Network is responsible for the accuracy of the information contained within the linked site
How can a Mortgage Broker help?
As Mortgage Brokers, IMS Financial compare hundreds of mortgage deals on your behalf across high street lenders and providers who specialise in mortgages for self-employed borrowers.
We’ve worked with lots of Self-Employed people to achieve their property goals. We’ll explore the options and give you specific mortgage advice for your unique situation. Then, when you’re ready to do the mortgage application, we’ll make sure you have all the documents and information you need.
We are an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority, so give us a call today and let us help you find a good mortgage deal.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE