Self-Employed 1 Year Accounts Mortgage
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Self-Employed 1 Year Accounts Mortgage (Part 1)
Martin Whalley explains how the mortgage process works if you are self-employed with one year of accounts. Episode one of two, recorded in November 2024.What are the requirements for getting a mortgage as a self-employed individual with one year of accounts?
Generally speaking, you will need the latest year’s accounts, the latest tax year overviews and also the tax calculations if possible. That’s pretty standard – it’s the same for those who have been self-employed for two years, where they just supply an additional year’s records.
What is acceptable proof of income for a self-employed mortgage applicant with one year of accounts?
You’ll need this year’s accounts, plus the tax year overview and tax calculation. It can also be very helpful to have a letter from your accountant to back up the numbers and confirm the sustainability of the business moving forward.
Do self-employed individuals with one year of accounts have access to the same mortgage products as those with longer accounts?
The products, generally speaking, are exactly the same. However, there’s a limited number of lenders we can go to with a year’s accounts.
If your profile doesn’t necessarily fit with a high street lender like Halifax, we look at alternative lenders such as Precise and Kensington – these are more specialist lenders where the rates could slightly differ.
How do lenders assess the affordability of a mortgage for self-employed individuals with one year of accounts?
The important thing is the documents I mentioned earlier – the accounts and the tax calculations. A letter from an accountant is also helpful to confirm the sustainability. That’s what lenders generally use to underwrite.
Are self-certification mortgages available for self-employed individuals with only one year of accounts?
Self-cert mortgages are longer available to anyone, whether you’re employed or self-employed or have one year’s accounts. Self-certification just doesn’t happen anymore.
What interest rates can I expect as a self employed mortgage applicant with one year’s accounts?
Interest rates will be in line with the market at the time of application. As long as your credit score meets the lenders’ criteria, it will be standard – the same as everybody else.
Are there any specific mortgage lenders or financial institutions that specialise in providing mortgages to self-employed individuals with one year of accounts?
Generally speaking, if you have one year’s accounts we will be looking at lenders such as Halifax, Kensington, Pepper Money and Precise. These are all very good lenders who are very strong in the marketplace and well priced on interest rates [information correct at time of recording in November 2024].
Are there any additional criteria or considerations that self-employed individuals with one year of accounts should be aware of when applying for a mortgage?
Not really. The main point is to make sure that the income is sustainable moving forward. Apart from that, it’s the same for everybody when applying.
How long does the mortgage application process usually take for self-employed individuals with one year of accounts?
With high street lenders it tends to be the same. If you’re going to specialised lenders, the application will go to a senior underwriter which can delay the application slightly. You’re probably looking at two days more than a normal application, in terms of the time to go to offer and be underwritten.
Is it beneficial to work with a mortgage advisor or broker if I only have one year of accounts?
Definitely – because we can assess your needs and will then know which lender is going to be the best to place your particular situation with.
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Self-Employed 1 Year Accounts Mortgage (Part 2)
Martin Whalley continues the conversation on how the mortgage process works if you are self-employed with one year of accounts. Episode two of two.
Can I apply for a joint mortgage with a partner who has a regular income if I’m self-employed with one year of accounts?
Absolutely. If you’ve got a partner with a regular income on the application, it will definitely strengthen the application for you. It’s a positive thing.
Are there any specific challenges that self-employed individuals face when applying for a mortgage with one year of accounts?
Generally speaking, no. As long as the income is sustainable and we can show that it will stay stable moving forward, there are no huge challenges.
The only difference is of course the number of lenders you can access will be limited. However, as long as you’re using a mortgage broker who can source and find that lender for you, you shouldn’t really have to jump through too many loops to get the mortgage.
What happens if my one year accounts show low or fluctuating income? Can I still qualify for a mortgage?
The way lenders work with accounts is that if you’re a sole trader, they work off the profit of the business over that year. If you’re a limited company, they’ll generally be working from a salary and dividends.
Even if income has fluctuated over that year, they will just be looking at the total. Lenders will sometimes also be looking for bank statements showing money coming in, but as long as that has been steady, it shouldn’t cause any issues at all.
What impact does credit history have on the mortgage application process for self-employed individuals with one year of accounts?
Lenders absolutely do consider credit history when you’re applying for a mortgage, and this also applies to a self-employed individual.
A high street lender that accepts one year’s accounts will want to see that you’ve got good credit history. However, if your credit history has been adverse historically, or if you’ve got a low credit score, there are other lenders we can access. These aren’t necessarily high street lenders but they do specialise in adverse credit and also one year’s accounts.
Are there any government schemes or support available to assist self-employed individuals with one year of accounts in getting a mortgage?
There’s no scheme specifically for those with one year’s of accounts. However, there are schemes in the marketplace like Right to Buy and shared ownership that lenders support.
Some of those lenders will use one year’s accounts, and generally speaking, the shared ownership schemes will allow you to do that as well.
Are there any alternatives to traditional mortgages that may be more suitable for self-employed individuals with one year of accounts?
Many non-high street lenders will lend with one year’s accounts. Just to name some, these include Precise and Kensington Mortgages.
Can I use additional sources of income such as rental income from properties or dividends when applying for a mortgage as a self-employed individual with one year of accounts?
Yes, you can use additional income. Rental income from other properties can be used, and sometimes there’s additional criteria linked to that. But generally speaking, you can absolutely use additional income when applying for a mortgage with one year’s accounts.
Is it possible to make overpayments or pay off a mortgage earlier as a self-employed individual with one year’s accounts?
Most lenders will allow you to overpay by 10% of the mortgage balance each year whilst you’re in the fixed-in period. If we’re going to the adverse lenders, however, sometimes they don’t allow overpayments during the incentive period of the mortgage.
Can I get a Buy to Let mortgage with one year’s accounts?
There aren’t really any differences. There are many Buy to Let lenders that will lend if you don’t have any income at all. They work on the rental income that the property is going to generate.
The lending is based on the rental income as opposed to your own personal income. So one year’s accounts won’t restrict you from getting a Buy to Let mortgage at all.
What steps can I take as a self-employed individual to increase my chances of securing a mortgage with one year of accounts? How can a mortgage broker help?
It’s really about getting your paperwork in order, making sure that your accounts are up to date and filed with HMRC, and making sure you’ve got your SA302 tax calculations to hand. Check your accountant is available to confirm the sustainability of your business, too.
Make sure you’ve got your ID and your personal bank statements, which all lenders will need to underwrite a mortgage that you apply for.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.
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