Mortgages When You Have No Accounts
It might seem out of context to mention the Covid-19 pandemic, given that it evinced itself as singularly detrimental to a great majority of businesses. However, it did, in fact, inadvertently kickstart a trend of people choosing to opt for a self-employed lifestyle, a trend which has lost little pervasiveness in the past couple of years. It’s easy to see, a lot of individuals now want a fresh start to employment. Namely, employment that veers away from the standardised 9-5 shift patterns in favour of a relatively flexible dynamic on the back of a personal passion, whether this entails sole trader, freelance, contractor, or company director work. Yet, it likewise remains that there is a substantial level of demand on the housing market, a landscape that can be more difficult to navigate if you’ve only recently become self-employed.
With this background, it’s natural for startup business owners to feel disheartened regarding their housing prospects. Indeed, even feeling like it’s impossible for them to secure a spot on the property ladder, owing to them not having sufficient official documentation to back up their financial state. And, to a degree this is true, it is an integral part of the mortgage process to provide lenders with adequate evidence of your income, in addition to your overall financial security. After all, mortgage providers need to be certain that you’ll be able to comfortably keep up with your monthly repayments before they issue you an offering. But, how can you achieve this when your business has yet to establish a long history?
Well, although it may, admittedly, be trickier to secure a mortgage loan if your new venture hasn’t been running for long, as opposed to if you were a salaried worker, it would be wrong to think that you can’t become a homeowner. The crux is that there are opportunities waiting to be seized on the housing market for everyone, it’s just that some require more tailored advice than others. In the specific case we’ve been discussing, there are mortgages when you have no accounts out there. This mortgage type is typically only offered by specialist lenders, meaning that it’s essential to have specialist advice if you’re to get the best deal. It’s for this reason that we highly suggest you hire an expert mortgage broker to help evaluate your situation and lay out your options, all while guiding you through every step of the process. We at The Mortgage Genie have aided many of our UK clients by securing mortgage deals for them when they have had no accounts, notwithstanding the implied hurdles. If you’re interested in joining the plenty among our success stories then be sure to contact us by calling 01915809890 today.
Despite what our services can do for you, there’s still a lot that you have to personally know before coming to a concrete conclusion. In order for you to familiarise yourself with a mortgage when you have no accounts, and all the details therein, we’ve pieced together this article which goes over the hot questions alongside the salient information. We will cover:
How do you provide proof of income when you have no accounts?
What size mortgage deposit do you need when you have no accounts?
How long do you need to have been self-employed to get a mortgage?
Why is it difficult to get a mortgage with no accounts?
It’s fairly evident as to why it’s notably more difficult to get a mortgage when you have no accounts. That is, mortgage lenders are tasked with the responsibility of taking a sensible approach when it comes to distributing loans. Consequently meaning, that they are required to ensure that you will be able to consistently make your monthly repayments for the entirety of the mortgage’s term. And, fundamentally, the way lenders discern this is by looking at indications of your financial health & stability. For self-employed individuals, this usually implies an inspection of their yearly tax returns via Self Assessment, as represented by a SA302 document.
When you have no accounts, and so can’t access the relevant formal documentation, the process therefore becomes more complex. Prior to 2014, it used to be so that those who were self-employed could get a ‘self-certification mortgage’, where they would confirm their financial suitability themselves. However, this led to many people securing mortgage deals which they couldn’t repay. As a direct result of the UK’s financial crash in 2007, self-employed individuals can no longer self-certify, and lenders have adopted thorough meticulousness concerning the self-employed ever since. For instance, most mortgage lenders often require three years’ worth of accounts from you if you’re currently self-employed now.
How do you provide proof of income when you have no accounts?
One of the primary steps to getting a mortgage is having proof of your income at hand so that a lender can verify your financial capability. If you have no accounts, due to not having been trading under self-employment for a long period of time, then you may be drawn to thinking that you can’t satisfy this prerequisite. Fortunately, there are other ways to prove your income.
Besides, there are perfectly justifiable reasons for having no accounts, such as if you became self-employed just after the previous tax year ended, and so had no way of filing your Self Assessment tax return for the first year in which you were in business. Having said this, you aren’t required to wait until the deadline before filing your first tax return, meaning that you could acquire one years’ worth of accounts earlier. If you think this might apply to you in the future, then you should read up on mortgages with one years’ accounts.
Although, instead of waiting, an alternative way to provide earnings evidence is with other material forms of income. These may include any bank statements, invoices & receipts, contracts for both current and future work, and certified financial projections which you have access to. In essence, you want to give your lender a singularly accurate representation of what you have made monetarily so far, and what you are likely to make in the future. It’s worth mentioning that if you’re operating in the same industry as you were when you were on a salary, this will exhibit a traceable track record and thereby help your case. Likewise, if you regularly receive any benefits, rental income, or investment returns, this will count as income evidence too.
What size mortgage deposit do you need when you have no accounts?
When you’re considering obtaining a mortgage deal, it’s inevitable that you will question the size of the mortgage deposit you’ll need. Mortgage deposits are very much your starting point in the involved process, for that they denote the options available to you to a considerable degree.
Simply put, if you’re self-employed and do not have any accounts yet, you will be expected to put forward a bigger mortgage deposit than usual. This is because having no accounts means that you potentially pose a risk to the lender, given that you can’t provide extensive evidence of your financial stability to counter their initial impression.
To give an example, lenders might want a deposit worth of at least around 20% or 25% of a property’s total value from you before making you a serious offer. In this context, you’d be looking at either a 80% LTV mortgage or 75% LTV mortgage, respectively. As a rule of thumb, the bigger your deposit is, the stronger your mortgage application is.
Not to mention, if you’re willing to put a larger deposit down, then this will entitle you to a wider selection of deals. Moreover, deals that come with more favourable interest rates, a factor that will play an important part in the cost of your monthly repayments. This is especially pertinent, when you come to take the extra fees and charges into account which are intrinsic within every mortgage package. As for how much you’ll be able to borrow exactly, mortgage providers are generally willing to lend between 4-5x of an self-employed individual's income. All of the above comprises the affordability check which every lender uses to partly assess a candidate’s suitability.
Can I get a mortgage with no accounts?
Alongside a lender’s affordability check, whether or not you can get a mortgage with no accounts depends also on how strong your overall personal financial stability is, as indicated by a hard credit check. Reason being, it might be that you can afford to keep up with your monthly mortgage repayments on the surface, but that you are liable to make financial decisions that typify poor money-handling behaviour, making you a ‘high-risk’ applicant. This is a foremostly significant point in the case of those who are self-employed because it’s not uncommon for businesses to fold within their first few years of trading.
Hard credit checks are essential to lenders determining the quality of this facet of your personal profile in that they display your credit score. Your credit score strongly suggests your financial reliability, and the check will also reveal if you’ve got any previous instances of adverse credit, payday loans, court county judgements (CCJs), IVAs, or bankruptcy claims on your report. If any of these appear, then they will work to negatively influence your mortgage application and can lead to lenders rejecting you. However, if they occurred more than six years ago, their effect on your trustworthiness might be offset, especially if you have a sizable mortgage deposit readily available. By the same token, there are lenders out there who specialise in distinct mortgage cases, i.e., it’s a matter of finding the correct lender for your financial situation.
It’s important to note that hard credit checks leave a mark on your report. And so, if you want to get an idea of your current eligibility before you submit an application, you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to highlight any possible mistakes or fraudulent activity on your profile, so that you can deal with such problems straightaway. The trial and subscription can be cancelled at any time.
Can you remortgage when you have no accounts?
Yes, just as it’s possible to get a mortgage when you have no accounts, it’s also possible to remortgage when you have no accounts. This is because the process for remortgaging is actually quite similar to the process for getting a standard residential mortgage by how the same checks apply for both.
In fact, it may prove easier to remortgage when you have no accounts depending on the amount of equity you have built up in your current property. The more equity you have, the lower your LTV ratio, and this equates to a greater number of lenders who would be willing to offer you a loan, particularly if you’re looking to remortgage to release equity.
How long do you need to have been self-employed to get a mortgage?
The reason you’ll need to go to a specialist lender if you have no accounts is that most high-street lenders will want to see three years’ worth of accounts, or your first tax return at the very least. The principle of this is rather simple, the more fleshed out the financial history of your business is, the easier it is for them to gauge a true representation of your annual net income. Again, lenders need to guarantee that you are financially suitable, and the more evidence to support your application, the better. If you have only one years’ worth of accounts or less, it’s likely that you’ll require a qualified accountant to provide finalisation.
This does not go to say that you have to wait to get a mortgage loan if you have no accounts to date, however. As we’ve discussed, if you’re a keen prospective homeowner who feels like it’s the right time to get onto the property ladder, then it’s more than possible for you to secure a mortgage deal, so long as you have a specialist mortgage broker at hand to evaluate your situation.
Here at The Mortgage Genie we have a comprehensive understanding of how to get a mortgage and are dedicated to helping people secure loans of all types. We sincerely hope that this article has worked to clear up any doubts you may have had about mortgages when you have no accounts, all while answering the pressing questions.
Every day we help an increasing number of people to achieve housing happiness by finding them a mortgage product that aligns with their personal situation & financial circumstances, as well as by helping them to navigate through each step of the, often complicated, process. If you require a team of expert mortgage brokers, then be sure to get in touch with us at 01915809890 and we’ll start working on a solution that has you owning your dream house as soon as possible! And why not see how much you could borrow up to today by using our mortgage calculator?