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.
What type of company do you have?
No impact on your credit score
Author: Pete Mugleston - Mortgage Expert, MD
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.
The following topics are covered below...
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.
Work out your maximum borrowing before you get started
You can do this using our calculator below, which includes the option to input the number of years of trading history that you have.
Self-Employed Mortgage Calculator
This calculator can work out your maximum mortgage borrowing if you're self-employed. Select your trading style from the drop-down menu, then enter your income and outgoings, and our calculator will do the rest.
You could borrow up to
Most lenders would consider letting you borrow
This is based on 4.5 times your net profit or the total income declared. To borrow more than this, you will need to speak to a mortgage broker who specialises in self-employed borrowers
This is based on 4.5 times your share of the partnership's net profit or total income declared. To borrow more than this, you will need to speak to a broker who specialises in self-employed borrowers
This is based on 4.5 times your share of the net profit/salary plus dividends, or total income declared. To borrow more than this, you will need to speak to a broker who specialises in self-employed borrowers.
This is based on 4.5 times your income. To borrow more than this, you will need to speak to a broker who specialises in self-employed borrowers.
Some lenders would consider letting you borrow
This is based on 5 times your net profit or your total income recieved. This income multiple is often unavailable to borrowers who aren't applying through a mortgage broker.
This is based on 5 times your share of the partnership's net profit or your total income recieved. This income multiple is often unavailable to borrowers who aren't applying through a mortgage broker.
This is based on 5 times your share of the net profit/salary plus dividends, or your total income recieved. This income multiple is often unavailable to borrowers who aren't applying through a mortgage broker.
This is based on 5 times your income. This income multiple is often unavailable to borrowers who aren't applying through a mortgage broker.
A minority of lenders would consider letting you borrow
This is based on 6 times your net profit or the total income declared. This income multiple is only available under specific circumstances and is usually only accessible via a broker.
This is based on 6 times your shares of the net profit or total income declared. This income multiple is only available under specific circumstances and is usually only accessible via a broker.
This is based on 6 times your share of the net profit/salary plus dividends, or total income declared. This income multiple is only available under specific circumstances and is usually only accessible via a broker.
This is based on 6 times your income. This income multiple is only available under specific circumstances and is usually only accessible via a broker.
Now that you have a rough idea of your maximum borrowing, get in touch to speak to a mortgage broker who can provide bespoke calculations and access to the best rates and deals.
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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
Which lenders have you already tried?
40% of our customers had been declined elsewhere before coming to us. The brokers we work with will be able to assess your circumstances and then identify the right lender for you instead of going direct.
Can you 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.
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Get matched with broker who specialises in self-employed mortgages
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.
Get Started with a Broker
Maximise your chance of approval with specialist advice from a mortgage expert.
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.
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.
Ask a quick question
We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Self Employed Mortgages. Ask us a question and we'll get the best expert to help.
Mortgage Expert, MD
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!