Mortgages with One Years Accounts
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Self-Employed Mortgage with One Year’s Accounts
When you become Self-Employed, all your efforts are focussed on starting your new business, and everything that goes with it. It probably didn’t cross your mind that a year down the line you’d need to apply for a mortgage.
Heading off to one of the familiar high street lenders with only one year’s worth of accounts to prove your income stability, could end in disappointment – or worse. A mortgage rejection at this stage could affect your credit record, making it harder to apply to another lender.
However, talking to an independent Mortgage Broker instead of going it alone, will improve your chances of success. They’ll open the door to specialist lenders that are used to helping Self-Employed business owners buy a property, or remortgage, even if you just have one year’s accounts.
Can I get a mortgage if I’ve been Self-Employed for one year?
You can, provided you meet the affordability criteria specialist lenders set for Self-Employed people. You can apply for a residential mortgage if you are a:
- Sole-Trader or in a Partnership with less than 12 months’ trading history
- Limited Company Director – with nine months to one year’s trading history
- New contractor who has worked for less than 12 months
A Mortgage Broker with experience of helping Self-Employed mortgage applicants will be able to help you. To give yourself more time, you could always apply for a Mortgage in Principle first.
How do I prove my income with one years accounts?
To prove your business and personal income, you will need to submit your company’s accounts for the most recent tax year to the lender for scrutiny.
These need to be finalised accounts, calculated by a qualified accountant. Having a good credit record will also place you in a positive position with a lender.
If you’re applying for a Buy To Let Mortgage, lenders are generally more interested in the amount of rental income you expect to receive than your personal or business income.
Self-Employed Sole Trader
If you work for yourself, you’ll need to be registered with HMRC as a Sole Trader.
Lenders recognise the Self-Assessment SA302 form as proof of your Self-Employed income and tax paid in the latest tax year. You can either request a copy of the form from HMRC or ask your accountant to forward you a copy.
Submitting this form to the lender, together with one year’s accounts, should be enough for them to make a decision.
As a Limited Company Director you pay yourself a salary and draw dividends from your profits. A lender will want to know how much net profit you made during your first tax year and will ask to see either your director’s payslips or/and proof of dividends you’ve taken from the business which is evidenced by way of the SA302.
These items will show up in your latest year’s limited accounts for the latest tax year. They may also be interested in the value of your assets.
If you work in partnership with another person, you’ll need to submit your company accounts plus your share of profits and your own SA302 form.
How much can I borrow?
Depending on the lender’s rules and your own circumstances, you should be able to borrow up to 4.5 times your annual income with most lenders, however some lenders are able to go to 5.5x income dependent on your income level/specific profession. You may be able to borrow more if you can show current profits if you have one year’s accounts plus an additional nine months of trading.
How much deposit will I need?
Being able to put down a healthy deposit of 25% or 40% of the selling price will be music to most lender’s ears – but not everyone has that kind of money available.
However, it’s possible to get a good mortgage with a deposit of 10% and 15%. And, with the introduction of the Mortgage Guarantee Scheme in April 2021, more lenders are bringing back their 95% Loan To Value (LTV) mortgages.
This means you could qualify for a 5% deposit mortgage provided the house you buy is for you to live in and costs less than £600,000 and you have an excellent credit score.
Can I get help to buy if I’ve only been trading for one year?
Yes, help to buy schemes are available to Self-Employed people. So it’s definitely worth exploring the options such as Help to Buy, Right to Buy and Right to Acquire.
Discuss these options with a Mortgage Broker who knows how these schemes could benefit you and the lenders who offer them.
How can Heritage Mortgages help me?
We understand how running your own business absorbs most of your time. That’s where we come in.
Our job is to save you time and money. We’ll help you work out the amount you can spend on buying a new property and how much deposit you’ll need.
Then we’ll compile all the paperwork for you and submit your application to our range of lending specialists on your behalf. We’ll inform you every step of the way while your application is being processed.
Heritage Mortgages is authorised and regulated by the Financial Conduct Authority (FCA) and is registered in England. We are qualified to discuss your financial plans and offer mortgage advice.
To find out more about how we can help you get a Self-Employed mortgage with one year’s accounts – contact us today for an informal chat.