Getting a mortgage for the Self-Employed is not the challenge it once was. Many lenders are happy to accept Self-Employed people, as long as you can confirm your income with a few documents. Some will even accept people with just one years’ accounts.
Can you get a mortgage if you’ve only been Self-Employed for one year?
Your income gives the lender a guide for how much to offer you in a loan. If you have a standard job this is just a question of proving your income by supplying a few payslips.
For the Self-Employed, your monthly income can vary and there’s no easy way to show how much you earn. Lenders will therefore look at your accounts and tax forms to work out an average – and this is why you often need two years’ worth of accounts or more.
If your business hasn’t been running that long, a few lenders will accept just one years’ accounts.
How much can I borrow?
Lenders calculate how much you can borrow based on your annual income. The total might be four to five times your annual earnings, but every lender is different! That’s where we come in!
We will work with you to make sure that the monthly repayments are comfortably affordable, as your home is at risk if you can’t keep up with the payments. The best advice is to speak to one of our team!
How do I prove my income with only one years’ accounts?
Proving your income when you only have one years’ records is the same process as if you have two years or more. It’s a case of sharing a few documents including a set of accounts, certified by a qualified accountant.
You will need to supply your self-assessment tax return (SA302) stating your annual earnings, or your Tax Year Overview and Tax Calculations.
Lenders will also look at your credit score. If you’ve had credit problems in the past six years it may be more difficult for you to find a lender and could mean you face higher interest rates. Low level issues like a single missed credit card payment may not be an issue.
What happens if I’m a Sole Trader, in a partnership or have a Limited Company?
As a sole trader, there’s no legal separation between you and your business, so lenders see your business profits as your income. You will usually need to supply the SA302 self assessment form to confirm your annual income, as well as the Tax Year Overview and Tax Year Calculations documents.
If your business is a partnership, lenders see your income as your share of the profit. This sometimes catches people out, as it can mean you’re offered a smaller loan than you were hoping.
For a limited company, mortgage lenders will look at your finalised accounts. Many lenders take your income as the stated salary and dividends, but some providers will also include your net profit. This usually means you can borrow more.
What deposit will I need?
The minimum deposit is 5% of the property value, but this can be an expensive and risky way to borrow. If you can put down 15% or more you’ll get better rates and a wider choice of lenders.
Can I get Help to Buy as Self-Employed with one years’ accounts?
Possibly. The government brought in the Help to Buy schemes to help people get on the property ladder, and they largely apply to new build homes.
An Equity Loan means you can buy with just a 5% deposit, supplemented by an interest-free loan from the government (for the first five years. The loan means you can put down a deposit of up to 25% (45% in London).
With Shared Ownership, you part-rent, part-buy a property. Both Help to Buy schemes are open to Self-Employed borrowers, including those with just one years’ accounts.
How can a Mortgage Broker help?
Here at Prestige Mortgage Solutions we’re here to take the stress out of finding a mortgage. We explore hundreds of mortgage deals on your behalf, looking at both high street lenders and specialist providers.
Our mortgage advice has supported lots of Self-Employed people to achieve their property goals. We make the whole process stress free – we’ll get you an Agreement in Principle, help you identify the documents you need and assist with the mortgage application.
Call Us on 0330 135 8047