Mortgage with 1 Year’s Accounts

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Getting a Self Employed Mortgage with 1 Year’s Accounts - What you need to know

No matter who you are and your financial situation, it can be hard to apply for a mortgage. Things are more complex when you are self-employed. Especially if you are newly set up and applied for a mortgage with 1 year’s accounts.

Normally, a mortgage lender will be looking for at least 3 years of evidence on your accounts. This is because they want to see that you are someone who will pay back any money that they lend. This is a key part of their affordability and eligibility checks.

Only been trading for 1 year? You still have options.

If you only have been in business for a short time, then you will have less than the 3 years accounts. If you only have a year’s accounts, then you are going to find it much harder to apply for a mortgage. This is because the lender will find it harder to carry out their affordability checks.

It is important to know that all is not lost when it comes to arranging a mortgage with 1 year’s accounts. Sure, it is going to be a little trickier to do and there might be other things that you need to consider. But there are specialist lenders and brokers who can help you to secure yourself a mortgage. Even if you do not always fit into the standard expectation for an applicant.

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Who can apply for a mortgage with 1 year’s accounts?

If you are self-employed then this type of mortgage can be applied for. This applies in a variety of situations. Whether you run a company as a director, you are classed as a sole trader, you are a contractor or you are any other individual who can be described as self-employed. All that is asked is that you are an owner of more than 20% of the business.

You can apply for these mortgages for both personal and business purposes. They can then be used to purchase a buy to let property or somewhere to live. In fact, you can apply simply to make an investment into your future. Be that of your own personal life, with your family, or your business.

How much can I borrow with only a years’ worth of books?

As with all mortgages, the amount you can borrow is dependent on several factors. These include the income you are receiving, minus your expenditure to live in or maintain the property. Another big factor is your credit score, which can vary from lender to lender, as they use different methods of credit scoring. There are 3 big credit agencies which lender look at and therefore it is a good start to obtain a credit report which details the information from all these sources. Luckily enough we have included a link for to the one we recommend as they provide a free 30-day trial.

What documents would I need to prove my income?

Depending on your status of self-employment can determine which documents the lender would require. Below I have broken down the different documents that could be asked for if you are applying for a mortgage with 1 year’s accounts:

Sole Trader

Most lenders want to see your self-assessment return, commonly known as SA302’s or your tax calculations. This breaks down how much profit from self-employment you have had over a financial year. You can either download these yourself from the HMRC website or if you employ an accountant, you would be able to ask them to provide you with the return.

In certain scenarios, where your self-assessment does not cover your whole years trading, finalised accounts signed by a qualified account can be used to prove earnings along with bank statements to back up the figures.

Limited Company Director (more than 20% ownership)

Again, in this scenario lenders ideally like to see your tax calculation as this will break down any salary you are paid and dividends you are drawing from your company. However, this does not always show the whole picture if you are retaining profits in the business.

There are lenders who with fully audited accounts, can look at profit in the business plus the salary you draw. These lenders would be looking at your accounts and, in some cases, request an accountant’s certificate. This is where your accountant would verify the figures and provide an insight to the ongoing sustainability of the business. In some cases where you have been trading for 18 months, an accountant can provide a projection for the 2nd year to give the lender confidence with their lending.

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What about remortgages?

These mortgages are not only applicable when it comes to buying a new property, they can also be used for remortgages. They work much the same as the standard mortgages however the lender will look at whether you have any equity in your current property. It is this level of equity which will then tie into how much you can release from the property and borrow.

It is likely to be easier to secure a remortgage with 1 year’s accounts if you can show that you have made good repayments on your current mortgage. This is because it demonstrates that you have a good level of control over your finances. It also shows that you are a stable borrower who makes payments consistently. This is something lenders do like.

I have got bad credit; can I still get a mortgage with 1 year's accounts?

While having bad credit does reduce your ability to find a high street lender, there are specialist lenders in the market who can consider a years’ worth of accounts alongside bad credit. Understanding the reasons for the bad credit and when it happened are important and in most of these cases a higher deposit is requested by the lender. This puts their mind at ease with the additional risk they face. By using a specialist lender, you are likely to see much higher rates than the high street banks provide but they can give you a few years to repair your history and then move to a more favourable lender if you keep your finances in check.

How can a mortgage broker help?

One way to make securing a mortgage with 1 years accounts easier, is to speak to an expert. This is where someone such as a mortgage broker can help. A mortgage broker can ensure that you have all the relevant documentation and evidence ready. As well as that you are doing everything right. Both of which will help the application to be approved.

Why choose Matrix Mortgages?

Over the years, our business principle, Yasheen, has built up a reputation of finding solutions for self-employed businesspeople. In fact, it is one of the areas he enjoys the most. We understand your situation, pressures, and dreams. Our job is to take away the added stress and give you the dream without the stress!

As well as approving a mortgage with 1 year’s accounts. We can also save you time too.  This means that you can focus on your business, or perhaps some other aspects of moving home. After all, the planning and preparation that goes along with this takes time. It also limits the amount of times that you are declined, impacting on your credit rating.

Your home may be repossessed if you do not keep up repayments on your mortgage

Why Matrix Mortgages

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