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Self-employed mortgages using the latest years income

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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: 23rd August 2019 *

Since the credit crisis and subsequent recovery in certain sectors, the number of people setting up their own companies has increased, and with the recent increases in trade and growing activity in many industries, incomes for the self-employed are beginning to grow to new levels. We have seen it with a range of people - tradesmen, financial service workers, contractors, and even arts dealers, anyone reporting record incomes for the last financial year (2017-2018). As such, there is great need for lenders to view income and affordability on a more flexible basis, particularly for those who need to borrow more than their previous years books will allow. Thankfully, there are one or two who will lend based on the latest years income (net profit / salary+dividends) and the affect this can have on your max borrowing can be massive.

  • Borrow based on the latest years books
  • Borrow with only 1 years accounts
  • Borrow if you have recently changed to a limited company
  • With bad credit
  • Up to 90% mortgage

Make a full enquiry here, for advice from an expert self-employed mortgage advisor. If you’re having trouble finding a mortgage lender that accepts your latest years accounts – let us know! An advisor can help you today, just get in touch either with a quick question or make a full mortgage application. If you require quick approval or a quote from an expert please click the LIVE CHAT balloon or give us a call.

Borrow based on your last years income

It's often the case where self employed borrowers struggle to obtain the mortgage they need as their income has increased. Whether earnings have inflated in a small or a dramatic way, those looking to maximise the amount of borrowing on a self-employed mortgage may need to use specific lenders. Most mortgages are assessed on whatever income is deemed as sustainable, and this is usually established by looking at the history of the income and working out an average figure, usually calculated from the last 2 or 3 years. If you want a mortgage having had a large increase in income, then you can be limited by your previous years accounts with the majority of lenders, luckily there are some who can consider lending based on your new level of earnings in the right circumstances.

How calculation methods affect borrowing capacity

The impact of this calculation on your maximum borrowing can be huge, as the table below indicates. Click here for a comprehensive mortgage quotation.

Borrowers income history...

Year of trading Net profit / Dividend+salary
2016 85,000
2015 40,000
2014 38,000

Assuming that all 3 of these lenders offer 4x income and that the borrower has no other outgoings, the impact caused by how the lender calculates their income can be massive. Using the latest year like lender C compared to using an average of the last 3 like lender A, can mean the difference between borrowing 217,333 and 340,000 = a staggering £122,667 for what is exactly the same customer!!! That can be the difference between that dream home or the next stop gap property.

Lender Calculation method Maximum borrowing
A Average of last 3 years 217,333
B Average of last 2 years 250,000
C Use latest year only 340,000

If you’re having trouble finding a mortgage lender that lends you enough – let us know! The experts can help you today, just get in touch either with a quick question or a full enquiry. If you require immediate assistance please give us a call.

Updated: 23rd August 2019
OnlineMortgageAdvisor 2019 ©

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 info 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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