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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 29th October 2020*

The following applicants CAN get a mortgage (Accurate as of March 2020  & subject to status):

  • Limited company directors only trading for just 9 – 12 months. See our guide to limited company director mortgages for more information
  • Mortgages for sole traders only trading for just 9 – 12 months
  • Established businesses recently limited / changed trading style
  • Contractors working for less than 12 months
  • 9 – 12 months self-employed with bad credit
  • No income necessary for buy-to-let
  • Up to 95% mortgages with Help to Buy

Make a full enquiry for advice from an expert self-employed mortgage advisor. If you’re having trouble finding a mortgage lender that accepts 1 year accounts – let us know! An advisor can help you today.

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Foreword by Pete…

Q. Can you get a mortgage if you’ve only been self employed for one year?

A. YES! Like many of the people that enquiry with us, you might be reading this because you’ve been either refused a mortgage for not having enough trading history or you’re thinking of applying but aren’t sure what a lender will ask for. Either way it’s true to say that obtaining a mortgage with less than 2 years accounts can be very tricky.

The good news is that it IS possible. And, with the experience our advisers have as well as the lenders we have access to,  it’s even do-able with with things like adverse credit history.

FAQ: Mortgages for self employed 1 year

To help you in your search we have answered the most frequently asked questions taken from the enquiries we get through every month. For more information, to answer a specific question, or to get a mortgage quotation that suits you personally, ask the expert above, make an application, or give us a call today on 0808 189 2301.

  • How long do I need to be self-employed?
  • Can I apply before 12 months?
  • Getting a mortgage when trading under 2 years
  • Which occupations are acceptable?
  • Why am I having trouble?
  • What is the most I can borrow?
  • Which figure on my accounts do lenders use?
  • Self-employed for 1 year and bad credit mortgages

How long do I need to have been self employed to get a mortgage?

Many lenders currently ask for 3 years accounts to prove income in order to borrow on a mortgage, there are a few that may consider mortgages for those self employed less than 2 years, and there are even a small number of mortgage lenders accepting 1 years accounts.

There are even a handful of options when you have only been trading for 9 months – so long as you have accounts from a qualified accountant drawn up year to date, the lenders can consider offering the mortgage before the full first year is complete.

I haven’t finished my first year trading yet – can I get a mortgage?

If you haven’t completed a tax return for your first year then it’s unlikely you’ll be considered by most lenders.

That said, thankfully, there are a couple of specialist lenders that can consider a mortgage without you having finished your first year trading.

Historically, mortgages without 1 years books just didn’t exist because the lender has to evidence that they have lent responsibly, and are required to base their lending decision on tangible proof that shows you can without doubt afford what you are borrowing. If you don’t have anything showing what tax you’ve paid, even if you have had a cracking first 6 months and earned way more than you need, it’s not acceptable.

However – If you are near to the end of your first trading year, at say 9-10 months, then it may still be worth making an initial application to get the mortgage approved in principle.

  • There are lenders happy to offer the mortgage now, based on the figures you have,
  • and others that require a full year’s trading but would be happy to approve the initial agreement, subject to you waiting until your year is up before making the full applications.

As these decisions tend to last for 3 months, this will ensure that you know well in advance of putting an offer in on a property that you can get a mortgage that you’re happy with.

The figure your adviser would use on this initial application would be whatever you anticipate earning as a net profit/salary & dividend, because at this stage it is not necessary to be 100% accurate.

So, if you think you’ll earn 20k, then they’d key this into the system for it to generate a decision based on your accounts showing this figure when they are eventually complete.

The credit score decision should really be the same regardless (so long as your income is not too different than your estimation) – giving you a pretty accurate result.

Can I get a mortgage with less than 2 years accounts?

With mortgages for those who have been self employed less than 2 years, the same rules apply as if trading for 1 year, as there would only be 1 set of accounts available. It may be possible to find a lender that would consider using a projected figure if you have been trading for say, 9 months of the latest year – see the ‘what is the most I can borrow?’ section below.

Which occupations are acceptable for a 1 year self-employed mortgage?

Generally, lenders are pretty flexible when it comes to the sector in which you work. As a result almost all occupations would be acceptable providing that the business is viable, trading as a going concern and income is sustainable. This may include taxi drivers, builders, plumbers, painter and decorators, electricians and other tradesmen, musicians, landlords, those in the financial sector, retailers, those with online businesses, professionals, investors etc…

Why is it harder to get a mortgage when you’ve only been self employed for a short time?

Self employed mortgages are typically more difficult to obtain because the lender may have difficulty establishing how much you earn, and therefore the risk of you not being able to pay back what you borrow. Generally, if you have been self employed for longer than 3 years, you would be considered by most lenders in the same way as an employed applicant. If you’ve only been trading for 1 or 2 years then it is often much more difficult and lenders may deem you to be more of a risk.

Gone are the days of pure self-cert mortgages, where self-employed borrowers could tell a bank what they were earning without proof, and borrow pretty much what they wanted. Since the recession, lenders have been forced to tighten their approach and request proof in almost all regulated borrowing applications. This has impacted the self-employed market massively, and many business owners and tradesmen now find themselves struggling to find finance. With the number of start-up businesses continuing to rise, we are finding more and more customers that have recently gone self-employed looking for finance and finding it difficult.

What is the most I can borrow if I’ve been self employed for a year?

Typically, self-employed applicants can borrow pretty much the same as employed applicants (depending on credit score), which is usually maxed out a 5x income. In certain circumstances, those earning a higher wage are able to ‘stretch’ this to a higher level if they can prove affordability.

Very occasionally, it’s possible to ask a lender to consider an income projection, based on accounts that are to be drawn up but the year is not yet finished – for instance, if you have been trading for say 20 months, you should have 1 years full accounts plus 9 months of the second year (depending on your tax year end).

If the most recent year’s 8 months are on track to show a much higher income for this year, and you are looking to borrow more than 5x the previous years income – then depending on the strength of the rest of the application, a mortgage underwriter may consider using a qualified accountants projection, and lend based on the anticipated income for the unfinished year.

Net profit Dec 2017- Dec 2018 = 22,000
Net profit Dec 2018 – Aug 2019 = 25,000
An accountant (depending on viability) may calculate that they expect trading to continue in line with the previous 9 months between dec 2018 and Aug 2019. Therefore 25k / 9 months = £2.77kpm. £2.77kpm spread over 12 months would be approx £33.3k for the year.

A lender considering the 33.3k lending at 5x income would equal approx. a £166k mortgage, whereas if they only accepted the finalised accounts the max would be approx. £110k = a huge difference.

It is important to note that it isn’t as straightforward and there is usually a lot more work involved getting to a decision, but it is possible.

What income evidence do I actually need?

Any mortgage lender that will accept 1 years accounts may require a different form of evidence, but nearly always require you to prove the income via a qualified accountant reference, finalised accounts, or a self assessment tax return (SA302). You would still be subject to the same income multiplier rules as any other applicant (generally a maximum of 5x income).

What figure is used to calculate my income?

Whether you have 1 year or 10 years accounts, the figure used is the same. For those looking for a sole trader mortgage or working in a partnership, the figure is either your share of the net profit when using accounts, or the ‘total income received’ on a self-assessment tax return (SA302’s). Mortgages for limited company directors, it is the directors’ salary and dividend received as stated on the accounts or reference.

Which banks consider self employed mortgages with 1 or 2 years accounts?

There are a range of mortgage lenders accepting 1 years accounts up to 3 years accounts (usually the maximum required).

It really depends on your personal circumstances as to which one is best, as they all have different criteria in other considerations aside from your income (such as loan to value, lending amount, location, property type, credit history etc.).

Some of these companies are high street names you may have heard of, others (especially for more specialist applications) you may not have – in any case they are all mainstream registered and reputable organisations that are fully regulated by the Financial Conduct Authority (FCA).

Can I get a one-year self-employed mortgage with bad credit?

Yes, bad credit mortgage lenders that consider applicants with one year’s books and credit issues do exist, but with some restrictions.

Currently, you would be required to have at least 15% deposit (15% equity if you want to remortgage with bad credit), and no defaults, CCJ’s, mortgage arrears in the last 2 years.

If you had missed /late payments on credit in the last 12 months you still may be considered, and often any issues with mobile phone companies are ignored.

Help to buy mortgages for Self-employed with 1 years accounts

If you have 1 years accounts you CAN get help to buy scheme help, and buy with just a 5% deposit (subject to credit score and usual criteria). There’s very few lenders considering self-employed help to buy mortgages, but they do exist and often have very attractive rates.

Remortgage with 1 years accounts

Remortgaging comes with the same stipulation as for main purchase mortgages – you need to have been trading and have 1 years books signed off by an accountant (Ltd companies) or submitted to HMRC (self assessment).

Still have questions?

Speak to a 1 years accounts mortgage broker specialist

If you’re having trouble finding a mortgage lender that accepts 1 year accounts – let us know! We work with experts that can help you today, just get in touch either with a quick question or a full enquiry by clicking the link below. If you require immediate assistance please give us a call on 0808 189 2301.

Updated: 29th October 2020
OnlineMortgageAdvisor 2020 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Find out more about how we help the self employed get mortgages.

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