Getting a Self-Employed Mortgage Based on 1-2 Years’ Accounts

Self-employed for two years or less and looking for a mortgage? Read our in-depth guide for everything you need to know.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 15, 2021

For anyone who’s newly self-employed, with just one or two years’ business track record, the degree of difficulty involved with getting a mortgage can feel pretty steep. But don’t believe anything you see or hear that suggests it isn’t possible – it is!

By following the steps outlined in this guide you’ll have all the insight, know-how and encouragement needed to give your mortgage application the best chance of being successful.

How long do you have to be self-employed to get a mortgage?

In theory, you could apply for a mortgage on the same day you first become self-employed. There isn’t, as such, a specific timescale or set waiting period before you’re allowed to submit an application.

In reality, however, most lenders expect to see a minimum of three years’ worth of certified business accounts and SA302 statements from HMRC as evidence of earnings. These documents need to demonstrate a healthy, consistent profit during this period. Any less than this and it’s likely your application won’t proceed any further.

The good news is, whilst all lenders work to very similar rules, they don’t all use the same eligibility criteria. So, although a number of mortgage lenders won’t consider anyone who’s only recently become self-employed, there’s also plenty who will.

The important thing is to know who these lenders are and what additional supporting evidence they’ll be looking for. Read on to find out how to choose the right mortgage lender based on how long you’ve been trading for and other key factors…

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How to get a mortgage based on one year’s accounts

If you only have one year’s business accounts it’s highly likely that this on its own won’t be enough to get your mortgage application over the line with most lenders.

The golden rule here is; the more relevant information and supporting evidence you can provide, the better chance you have of your mortgage application being accepted.

Here are a number of additional steps you can take to bolster your chances, some of which can be done habitually and not just when you decide to buy a property…

1. Speak to an experienced mortgage broker

When you’re ready to apply for a mortgage, one of the smartest decisions you can make is to approach an experienced broker first and ask for their help rather than go directly to a lender.

This is particularly relevant if you’re newly self-employed and you know your application needs support from someone with insider knowledge of what lenders are looking for.

Having the right broker on your side will definitely save you a lot of time and, potentially, some money too. Not only can they identify which lenders will be more flexible than others, they can also manage your mortgage application throughout the process.

If you get in touch we can arrange for a mortgage broker to speak with you who has experience of helping people previously in the exact same circumstances.

2. Prepare all of your documentation and include future income projections

You’re definitely going to need the certified accounts and your SA302 statement for the full year you’ve been trading. In addition, you can boost your application by asking your accountant to prepare any future income projections for the current year.

Quite a few lenders will ask for this if you’ve only got one year’s accounts. They can use these projections to make an assessment of how much you can borrow, even though the actual income hasn’t yet been declared to HMRC at this point.

3. Save as much as you can towards a deposit

The more you can save towards a deposit, the less you’ll need to borrow. A lower loan-to-value (LTV) will put you in a stronger position with a mortgage lender and could also help you secure better overall terms.

Whilst higher LTVs of, say, 90-95% are still possible if you have one year’s accounts, the chances of your application being approved would fare much better with an LTV of between 75% and 80%.

Higher deposits will simply open your application up to a larger group of lenders and the more that are willing to take a look, the better opportunity you have of it being successful.

Include your previous employment record

Any supporting evidence you can provide that can give a lender confidence of your ability to make the repayments is worth including, and a solid previous employment record before you took the leap across to self-employment is definitely something that will help.

This is particularly relevant if you’ve stayed in the same profession but simply changed your employment status. Make sure you keep your CV up to date and include this with your application. Again, in many cases, a lender will ask for this anyway so it’s a good idea to have this prepared and ready along with any historical employment references.

Check your credit reports

Keeping a regular check on your credit reports is something you should do habitually, regardless of your employment status. It’s just good financial practice.

Try and avoid applying for personal credit during the early stages of setting up your business if you can help it as this could affect your score when you apply for a mortgage. If your score is low then make sure you resolve any issues that may have caused this beforehand.

If you do have a bad credit history – don’t panic. a broker could help you find a specialist lender who will still consider applications, depending on the circumstances involved.

How to get a mortgage based on two years’ accounts

Remember the golden rule; the more supporting evidence you have, the better your chances. Two full years of trading, evidenced through certified accounts will attract a wider group of lenders to consider your application than if you only had one year’s accounts.

There are still a few lenders who may stick rigidly to the three-year rule but, again, the steps outlined above are still relevant and if you follow them you’ll have a better chance of getting approved for a mortgage.

These are the recommended actions you should take:

  • Let us match you with an experienced mortgage broker so they can help you identify which lenders are more likely to look at applications from anyone who’s self-employed with two full year’s worth of accounts.
  • Ask your accountant to prepare income projections for the third year and include this with your application.
  • Update your CV, highlighting any relevant previous employment
  • Save as much as you can for a deposit
  • Keep a regular check on your credit record

Can I get a mortgage based on the latest year’s accounts only?

Yes, it’s possible. If you’ve already been trading for a while and your latest years’ accounts show clear evidence of a significant boost in income then there are some lenders who will base their decision solely on the figures for this year in isolation.

The benefit of doing this is to improve your chances of being able to borrow more, based on the certified accounts for the current year rather than as an average over the last three years if income was much lower overall.

It’s important to know which lenders would be willing to consider an application on this basis and which wouldn’t. This is another example where it’s wise to ask for the help of a mortgage broker, rather than trying to approach lenders by yourself.

Get matched with a self-employed mortgage expert

Even if you’ve been self-employed for a number of years, getting a mortgage can be quite tricky. For anyone who only has one or two years’ worth of accounts it can seem even harder, particularly if you’re unsure exactly which mortgage lenders will consider your request and what information they’re looking for.

The shrewdest decision you can make is seeking out the help of a mortgage broker who specialises in helping self-employed people onto the property ladder. Their main aim is to help make a difficult process much easier and straightforward, and get you the finance you need.

Call 0808 189 0463 or make an enquiry and we can arrange a free, no-obligation call with a mortgage broker who has in-depth experience assisting self-employed people, today.

FAQ's

Can I apply for a Help to Buy mortgage with only one or two years’ accounts?

Yes, you can. The government’s help to buy mortgage scheme is designed to help first-time buyers get their first foot on the property ladder and is available to all regardless of their employment status.

It may not be easy with just one or two year’s accounts but it’s definitely possible. When you speak with the broker we introduce you to, they’ll be able to discuss this option with you in more detail.

Do I need to provide the same supporting evidence if I’m remortgaging?

Yes, you will. The process for remortgaging, even if it’s for the purpose of a better deal with your existing lender, is still the same. Your lender will still need to satisfy their own affordability criteria to make sure you can afford the repayments on a new deal.

This is why it’s good practice to make sure you have all the documentation and supporting evidence at your fingertips at any time.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the 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 information 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 that 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.

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