Self-Employed Mortgages With 1 Year’s Accounts

We explain how to get a self-employed mortgage with only 1 year’s accounts and what possible difficulties you may face. We identify which lenders will consider your application, what to do if you’ve been trading for less than 1 year, and how being newly self-employed affects any remortgage applications.

Can you get a self-employed mortgage with only 1 year’s accounts?

Yes, but it is more difficult than if your accounts went back further. Most lenders need you to have been self-employed for at least 2-3 years before they’ll offer you a mortgage. As a result, there will be fewer mortgage lenders who consider these types of applications but they definitely do exist.

Why it can be more difficult to get approved

It’s more difficult to secure a mortgage at this stage in your self-employment because mortgage providers will see the uncertainty of your future earnings as a risk. They won’t be able to calculate with as much confidence how affordable a mortgage is for you. As a result, most lenders only consider applications from self-employed individuals with three years of accounts or more.

What proof of income will lenders require?

If you only have 1 year’s trading record then some lenders will still be happy to consider your application if, in addition to a set of certified accounts or your self-assessment tax record for that year (SA302), you can provide a suitable financial projection for at least the next twelve months from a qualified accountant.

How much you could borrow?

If a lender accepts applications from the newly self-employed, you can borrow at least 4-4.5 times your income. The figure that is used to calculate your income is either your share of the net profit or the total income received on a self-assessment tax return. If you are listed as a limited company director, income is based on the director’s salary and dividends received.`

In some cases, if you think that your subsequent year’s income will be much higher than your first year’s, it is possible to find a lender who will consider an application calculated on a projection. The projection will need to be confirmed by a qualified accountant.

You can use our mortgage calculator if you’re looking for a quick estimate of your maximum borrowing.

Typical rates for self-employed mortgages

The table below provides an illustration of some of the best rates available for self-employed mortgages. Having less than three years track record may make it less straightforward for you to qualify for the most favourable mortgage terms. However, a skilled mortgage broker will be able to help you identify the right lenders, offering the most competitive rates, for your circumstances.

The rates quoted above were correct at the time of writing and are subject to change at any time at the lender’s discretion. Speaking to a mortgage broker is the best way to keep track of the rates available at any given time.

How to get a self-employed mortgage based on 1 year’s accounts

It is still possible to get a mortgage if you’ve only recently become self-employed and you can make the process a lot smoother by following a few simple steps. First, make an enquiry with us and we’ll arrange for a specialist mortgage broker to contact you who can help with:

• Advice on the specific eligibility criteria and documentary evidence mortgage lenders will look for in such cases – such as additional finance projections for the next one or two years to corroborate your one year’s earnings so far
• Downloading and optimising your credit records in order to identify any inaccuracies or outdated information that could hinder your chances of approval
• Finding the best mortgage lenders who have previous experience in this area of lending and assist with submitting your application

Which lenders will consider your application?

Currently (August 2023) the following lenders are examples of providers who could extend you a mortgage, based on only 1 year of accounts. These products are subject to change, however.

• Vida Homeloans – Will accept only 1 year of evidence of income if that is how long a person has been trading. Additionally, a qualified accountant’s projection or latest 3 months’ business bank statements are needed.
• Norton Home Loans – Applicants need to pass an Equifax credit search, provide 1 year proof of self-employed income and 1 month bank statement.
• Scottish Building Society – Will only consider applications for mortgages of 80% or less loan-to-value with 1 year of financial history. Applications need a projection from a qualified accountant. The type of business and number of shareholders can influence the final approval decision.

What if you’ve been trading for less than one 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. Lenders have to extend loans responsibly, and if they have no tangible evidence that you can afford your mortgage, they are not going to do so.

However, if you are nearing the end of your first year trading, you could approach a specialist lender that may offer you a mortgage in principle based on your current figures and your projected income. If approved, your mortgage in principle will usually last around 3 months. You can start looking now for potential properties to buy once you have completed your first year as you’ll know what you can afford.

There are also options available for self-employed applicants without accounts. They are situation-specific but you may be eligible for these mortgages. For example, if you are a contractor, a construction industry scheme contractor, or if you are a new business owner with previous track records in similar businesses.

Remortgaging when you’re newly self-employed

If you have only been trading for a year, it is still possible to remortgage when self-employed and lock in a fixed-rate deal. However, as with mortgage applications, it can be more difficult – lenders like to see 2-3 years of accounts as a minimum. You may find that your list of options is not as long as you would have wanted, giving you less choice in terms of rate.

Working with a broker is, again, your best bet. They’ll know what deals are an option for you when you are remortgaging. They’ll work closely with you to help you access the best rate you can with the income evidence you have available.

Why Use Online Mortgage Advisor?

While it’s not impossible to get a mortgage when you’re newly self-employed, it is a more difficult process than if you had been trading for a number of years. Plus, there are fewer choices available to you in terms of mortgage providers. That’s where we can help!

We can connect you with a specialist broker who will know what lenders will consider your application as a newly self-employed person and what you will need to do for your application to be successful. Therefore, you’re more likely to be approved and improve your chances of securing the best rate possible given your circumstances.

Our free, no-obligation broker matching service will connect you with the best broker for you. Call us on 0808 189 2301 or enquire with us today so we can put you in touch with a specialist.