Mortgages with One Year's Accounts

In recent years, the rate of people choosing to become self-employed has increased rapidly. Indeed, although the Covid-19 pandemic entailed major setbacks for many of self-owned businesses, it remains that there still exists a relatively higher number of sole traders, contractors, company directors, and freelance workers than once was so. And likewise, as is a constant, a lot in the UK are still trying to find a way to get onto the property ladder, which has always been a competitive prospect, to say the least.

In this context, it’s natural to see that a great majority of self-employed persons can feel uncertain about their chances of securing a mortgage deal, and how easily this sense of worry can be further accentuated if they do not have years of experience and documentation to support their case. After all, lenders need to be unequivocally convinced that you rely on a wholly stable income if they are to accept your application. It may even seem to be impossible to get a mortgage loan if your business venture hasn’t been running for long, and so hasn’t established a secure foundation.

However, having said this, although it may be more difficult to get a mortgage than if you were in a regular salaried position, it is only daunting if you do not have access to the right advice. Everyone’s personal & financial circumstances are different, and there is enough variety on the market to the point where there’s a solution for everyone. In particular, there are mortgages with one years’ accounts out there for those who haven’t been self-employed for a while, but who still want to own a property. This is a specialist mortgage type, and so if you hope to gain access to the best options, we strongly recommend that you hire the services of an expert mortgage broker to thoroughly assess your situation and guide you through every juncture in the, often complex, process. We at The Mortgage Genie have assisted plenty of our UK clients by landing them a mortgage with one years' worth of accounts, despite the common obstacles. If you’re interested in joining those among our success stories then be sure to give us a call at 0191 580 9890 today.

Yet, disregarding what our services can do for you, it’s still very much worth familiarising yourself with all the details on mortgages with one years’ accounts. So that you can comprehensively assimilate the subject, we’ve put together this piece which covers all the information that you need to know of before making a decision. We’ll go over:

• Why is it hard to get a mortgage with one years’ accounts?
• How do I prove my income with one years’ accounts?
• How much can I borrow with one years’ accounts?
• Can I get a mortgage with one years’ accounts?
• Can I remortgage with one years’ accounts?
• Can I get a buy-to-let mortgage with one years’ accounts?
• Should I wait to get a mortgage until I have three years’ accounts?

Why is it hard to get a mortgage with one years’ accounts?

Fundamentally, it is hard to get a mortgage with one year’s worth of accounts because it is a prerequisite for a lender to guarantee that you will, undoubtedly, be able to keep up with your monthly repayments for the entire mortgage term. Additionally, One principle way that lenders certify an individual's suitability is by rigorously inspecting their income and yearly tax returns.

The crux here is that, if you’ve only been self-employed for a year, then it’s probable that a mortgage provider will not consider this sufficient evidence to denote that your income is stable enough, since it inherently reveals the potentiality of you defaulting on your loan. Take, for instance, how before 2014 lenders permitted self-employed borrowers to ‘self-certify’ their mortgage applications, and how this led to many people ending up with mortgages which they could not realistically afford. This specifically caused a ban in self-certification for mortgages, as well as requiring lenders to be more stringent with applicants, hence why self-employed individuals after a mortgage now typically need three years’ worth of accounts to back them up.

How do I prove my income with one years’ accounts?

As we’ve implied, providing accurate proof of your income is one of the primary steps to getting a mortgage with one years’ accounts, otherwise a lender would have no notion of your current and prospective finances.

Once you’ve selected a lender who is open to considering your mortgage application, you will firstly need to give them your SA302 documents. This documentation contains your Self Assessment tax returns and can be downloaded online via the HMRC portal or asked to be posted to you. Alongside this, lenders may also request that you provide more proof of income, typically comprising your finalised accounts from a qualified accountant.

How much can I borrow with one years’ accounts?

How much you’ll be able to borrow with one years’ worth of accounts depends on a variety of factors. Of which, the foremost aspects are your net income, as well as the size of the mortgage deposit you’re willing to put forward. Namely, the larger these two monetary values are, the more you will be able to borrow, given that they give a considerable indication of your overall financial health. The key thing to note here is that mortgage providers do not want to open themselves up to any risk when distributing a loan, and that a larger pool of money goes a way to negate any intrinsic risk.

For this latter reason, lenders will inevitably carry out an affordability check before making an initial offer. Thereafter, as a general rule, it’s usually the case that lenders are prepared to offer up to 4-5x a self-employed applicant’s income. Albeit, it is possible for this figure to stretch further. It’s at this point where you should base your idea as to what loan-to-value (LTV) ratio is accessible for you.

The maximum LTV for a mortgage with one years’ accounts is a 95% LTV mortgage, one which requires you to provide a deposit worth 5% of a property’s total value. Whereas, it’s recommended that you have a deposit of at least 15% if you want a mortgage with one years’ worth of accounts, i.e., a 75% LTV mortgage. On this matter, the lower the LTV ratio you choose, the higher your chances of being accepted are, all while the lower your interest rates will be. This is especially pertinent, considering the extra fees and charges that should be taken into account when getting a mortgage.

Can I get a mortgage with one years’ accounts?

Whether or not you can get a mortgage with one years’ accounts is dependent, not only on you passing an affordability check, but also a hard credit check. This is because, even though you might be able to comfortably keep up with your monthly repayments, lenders need to be assured that you exhibit an attitude towards money which suggests that you are capable of handling it sensibly. This element of a candidate’s application is considerably emphasised in the case of recently self-employed individuals, given that a lot of startups unfortunately dissolve in the first few years.

Hard credit checks are essential to lenders’ scrutinisation of your personal profile because they make your credit score visible. Moreover, whether you’ve ever had adverse credit, failed to meet payday loans, handled a court county judgement (CCJ), had an IVA, or have claimed bankruptcy in the past. If any such instances appear on your credit report, then they will work to negatively influence your application and may even cause lenders to reject you. However, if they occurred over six years ago, then their impact might be mitigated. On top of this, it should be stressed that there are specialist lenders out there who are accustomed to a wide array of financial circumstances, and so it’s simply a matter of finding the right mortgage provider for you.

It should be mentioned that hard credit checks leave a mark on your report. So, if you want to get a firm notion of your current suitability before you submit an application, you can use our free credit check tool (£14.99 per month after the free 7-day trial). Using it will help you to spot any potential mistakes or fraudulent activity present on your file, so that you can deal with related problems quickly. The trial and subscription can be cancelled at any time.

Can I remortgage with one years’ accounts?

The process involved with remortgaging is actually rather similar to the process you have to go through to get a standard residential mortgage. Consequently, meaning that if you’ve discerned yourself to be eligible for a mortgage with one years’ accounts by glossing over all we’ve covered so far, then it’s likely that you can remortgage with one years’ accounts too. Still, it’s best to get advice from a mortgage broker for any housing decision you’re deliberating on.

The only additional point to note is that, when a lender is considering a remortgage application, they will also take into account the amount of equity you have in your property, especially if you’re solely remortgaging to release equity. Namely, the more equity you have, the better. In a similar vein, if you’ve got a good history of making monthly mortgage payments then this, in particular, will increase your acceptance chances.

Can I get a mortgage with one years’ accounts and bad credit?

Just as we mentioned, it is not impossible to get a mortgage with one years’ worth of accounts if you also have bad credit alongside this, although having bad credit does categorically harm your application. Having said this, each individual’s situation is unique and, while you may not have as many options as if you had an excellent credit score, you will have some options nonetheless. In fact, a large deposit can, partly, cancel out the effect that bad credit has on a mortgage application.

Again, because lenders view newly self-employed individuals as relatively ‘high-risk’ candidates, added bad credit further enhances this, especially if you’re a first-time buyer as well. For this reason, it’s vital that you have an advisor at hand to navigate your situation properly, so that you can be matched up with a specialist lender who has the required experience to get you a suitable spot on the property ladder.

Should I wait to get a mortgage until I have three years’ accounts?

It isn’t a bad idea to wait until you have three years’ accounts before submitting a mortgage application, for the reason that the majority of lenders will require you to have this if you’re self-employed. What three years’ worth of accounts provides is fairly evident, it gives lenders a greater insight into your financial stability and the stability of your business, as compared to what one years’ worth of accounts provides. In essence, entitling such self-employed applicants to the same mortgage offerings that normally employed applicants get access to. The chief takeaway here is that it pays to have a longer financial history.

Bear in mind, however, that if you desperately want to become a homeowner, then you absolutely can get a mortgage with one years’ accounts, assuming you receive advice from a specialist mortgage broker.

We at The Mortgage Genie have an in-depth understanding on how to get a mortgage and are committed to helping people secure loans of all types. We hope that this article has addressed any questions you had and cleared up all the ambiguities surrounding mortgages with one years’ accounts.

Each day we assist a growing number of people in acquiring housing happiness by finding them a mortgage product that is perfectly tailored to their personal situation and financial circumstances, all while guiding them through every step of the way. If you’re in need of a team of expert mortgage brokers, then be sure to get in touch with us by dialling 0191 580 9890 today and we’ll set you on the journey towards owning your dream house! And why not see how much you could borrow up to right now by using our mortgage calculator?