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Can you get a Mortgage if you have been self-employed for one year?
There are certain specialist lenders who offer mortgages to self-employed people who only have one year of accounts available, as opposed to the usual three. In most cases, you will need to use a Mortgage Broker to find these kinds of offers, as they are not available from most mainstream high street lenders.
As self-employed and freelance vocations become increasingly popular, some lenders have seen the need to provide mortgage opportunities to accommodate this. Whilst it’s not a straightforward option, it is certainly worth seeking further advice on this, should your circumstances be similar.
How do I prove my income with one years accounts?
There’s no doubt that it’s more difficult to prove your income as a self-employed borrower. Even when providing three years worth of accounts, many mortgage lenders will need much more information in order to make a lending decision.
Self-Employed or Sole-Trader
If you are self employed, you will need to provide your latest year’s accounts and/or your SA302 as evidence. It’s important that you have an accountant sign off on your accounts, if they would not ordinarily prepare them for you.
If you are part of a partnership then the mortgage lender would use your percentage share of the company profits to calculate your affordability and therefore the company accounts will be needed as evidence. It is important to note that you will need to own a minimum of 25% of the company in order to apply.
If you are a company director, then the mortgage lender will usually consider your salary and dividends. It is also possible that some lenders will consider your company net profits alongside your personal accounts. In this case, both sets of accounts are required as evidence.
How much can I borrow?
As with any type of mortgage, the loan amount will vary from lender to lender. It’s unlikely that any lender will offer more than five times your income amount.
As a self-employed applicant with only one year of accounts, you will be considered a higher risk application than those with a more stable income history. This will narrow down the choice of providers available to you and potentially reduce the total loan offer.
In some cases, usually when you have a very high income, certain lenders may consider projections on your future earnings. This will usually involve an underwriter and a qualified accountant’s profit projections.
Your credit score will also impact both the loan amount and whether or not you are able to obtain a mortgage offer. It’s worth looking into your credit history proper to any mortgage application.
What deposit will I need?
You will usually need to have at least 10% deposit available. Having a higher deposit, however, will increase your chance of acceptance and give you greater access to the better mortgage rates.
If you have bad credit then you will need to provide at least 15% deposit, again, the higher the deposit you can offer, the better.
Can I get help to buy if I am self-employed (Trading for one year) with one years accounts?
In certain circumstances, it is possible for those with just one year’s finalised accounts to obtain a help-to-buy mortgage. This will give you access to the 5% deposit rate and lower repayments for the initial period.
There are currently very few lenders, however, who offer help-to-buy mortgages to self-employed people and this will be especially true for those with a shorter trading history. It’s worth seeking mortgage advice if you are interested in pursuing this.
How can a Mortgage Broker help?
There are very few high street mortgage lenders who will consider self-employed people with one year of accounts. It is, however, perfectly possible to find lenders who will accept this criteria. A Mortgage Broker will be able to point you in the right direction of those who will.
Mortgage Brokers with a specialist knowledge of self-employed mortgages are most likely to be able to help. As well as matching your personal circumstances to the right lender, they are able to give you access to a wider range of options.
Another benefit of using a Mortgage Broker is to safeguard your credit score. Declined mortgage applications will affect your score and be detrimental to future applications. A broker will be able to advise against applications to those lenders who are not likely to accept your application.
Your property may be repossessed if you do not keep up repayments on your mortgage