Securing a mortgage often means providing evidence of consistent income over several years, which can be a challenge if you’re relatively new to self-employment. However, there are options available to help you secure a “Mortgage with 1 year’s accounts”. This guide is designed to provide you with useful information, outlining the potential routes you can take and offering practical tips to improve your chances of successfully obtaining a mortgage with only one year’s accounts.
Whether you’re a first-time buyer or looking to remortgage, it’s important to understand that, while it might be more challenging, it’s certainly not impossible. Let’s explore your options. This guide is designed to demystify the process and highlight the key steps towards securing a mortgage with just one year’s accounts.
Yes, it is possible to get a mortgage with only one year’s accounts in some cases. However, it can be more challenging as mortgage lenders traditionally prefer to see a longer history of income, typically three years of accounts, to assess the stability of your income.
For self-employed individuals or contractors, for instance, some lenders may consider a mortgage application with just one year’s accounts. They usually do this by calculating your average income over the period you’ve been trading, or potentially using the final year’s figures if your income has increased over time.
However, the criteria for approval can vary significantly from one lender to another. Some mortgage lenders are more flexible than others when dealing with applicants who have a short financial history. Others may ask for a larger deposit, charge higher interest rates, or impose other conditions to offset the perceived increased risk.
Obtaining a mortgage with just one year’s accounts can be a little more challenging, especially if you’re self-employed, but it’s not impossible. Here are some steps you can take:
1. Organise Your Accounts: Make sure your accounts are complete, accurate, and professionally prepared. Having accounts that are prepared by a chartered or certified accountant can give lenders more confidence.
2. Improve Your Credit Score: Having a good credit score can increase your chances of being accepted for a mortgage. Make sure you’re on the electoral roll, pay your bills on time, and try to pay off any outstanding debts.
3. Save for a Larger Deposit: A larger deposit can often improve your chances of being approved for a mortgage. It reduces the lender’s risk and shows that you are capable of saving and managing your money.
4. Prepare Evidence of Regular Work: If you’re a contractor or freelancer, showing evidence of future contracts or regular work can help.
5. Reduce Your Outgoings: Lenders look at your monthly outgoings when deciding whether to offer you a mortgage. Try to reduce any unnecessary expenses in the months before applying.
6. Work with a Mortgage Broker: A mortgage broker can be invaluable when you’re looking to apply for a mortgage with one year’s accounts. They will have experience of the market and be aware of which lenders are more likely to accept your application.
7. Consider Specialist Lenders: There are some lenders who specialise in offering mortgages to the self-employed or those with a limited accounting history. These might offer a viable alternative to mainstream lenders.
8. Apply: Once you’ve done all the groundwork, the next step is to apply for the mortgage. Make sure you provide all the necessary documentation and respond promptly to any queries from the lender.
The amount you can borrow when applying for a mortgage typically depends on your income and the lender’s assessment of your affordability. In most cases, lenders use a multiple of your income to determine how much they are willing to lend.
Traditionally, mortgage lenders in the UK may offer between 4 and 4.5 times your annual income. However, for applicants with only one year’s accounts, lenders may be more cautious, and the amount could be less.
For self-employed individuals, lenders typically look at the net profit of your business. If you have only one year’s accounts, lenders will base the amount you can borrow on this single year’s net profit.
Keep in mind that all lenders have different criteria. Some lenders may be more flexible and willing to lend a higher amount to those with only one year’s accounts, particularly if there are mitigating factors such as a large deposit or excellent credit history.
It’s also important to note that the lender will look at other factors such as your credit history, outgoings, and any existing debts you have. These factors could impact the amount they are willing to lend.
Yes, the nature of your business can indeed affect your mortgage application. Here’s how:
1. Business Structure: The way your business is set up can affect how a lender assesses your income. Sole traders, limited company directors, and partners in a partnership will all have their income assessed differently.
2. Industry: Certain industries may be viewed as higher risk than others by some lenders, especially those that are volatile or have unpredictable income streams. This could potentially influence a lender’s decision.
3. Profitability: A business that shows consistent profitability can make your application more attractive to lenders. If your business has only been profitable for a short period or has fluctuating income, it may make obtaining a mortgage more difficult.
4. Business Age: Newer businesses can be seen as higher risk as they have less trading history. Having only one year’s accounts can make it harder to get a mortgage, but it’s not impossible.
5. Future Contracts: If you’re a contractor, evidence of future work can help your application. The absence of future contracts may negatively affect your mortgage application.
6. Business Expenses: For directors of limited companies, how much you retain in the business versus how much you take as a salary or dividends can impact how a lender assesses your income.
Yes, it’s possible for first-time buyers to get a mortgage with only one year’s accounts, although it can be more challenging as most lenders prefer to see two to three years of accounts to assess the stability of your income.
While it’s more difficult, there are lenders who are willing to work with self-employed individuals, contractors, or business owners who have only been trading for a year. These lenders understand that traditional employment isn’t the only way to earn a living and have adjusted their criteria accordingly.
Having only one year’s accounts can affect your mortgage eligibility in several ways:
Limited Financial History: Mortgage lenders generally prefer to see a longer financial history – typically two to three years of accounts. This helps them assess your financial stability and predict your future income. With just one year’s accounts, lenders have less information to base their decisions on, which can make them more cautious.
Income Verification: If you’re self-employed or a contractor, lenders will want to see proof of a steady, reliable income. This can be challenging with only one year’s accounts as it is a smaller window to confirm stability.
Variability in Earnings: If you’re self-employed, your income might vary significantly from year to year. If you’ve had a good year, lenders might be cautious about whether this level of income can be maintained. Conversely, if your income has been lower, this may limit how much you can borrow.
Lender’s Criteria: Some lenders simply won’t offer mortgages to self-employed people or contractors with less than two or three years’ worth of accounts. Others may be willing to consider your application but might impose stricter conditions, such as a larger deposit or a higher interest rate.
Risk Assessment: Ultimately, lenders are trying to assess risk. The less information they have to go on, the riskier they perceive the loan to be. With only one year’s accounts, there may be perceived increased risk.
It’s important to note that every lender has different criteria, so it’s still possible to get a mortgage with only one year’s accounts. Working with a mortgage broker can help you navigate the process and find a lender that suits your circumstances.
When applying for a mortgage with one year’s accounts, you will typically need to provide the following documentation:
1. Proof of Identity and Address: This could be your passport, driver’s license, utility bills, council tax statements, etc.
2. Proof of Income: If you’re self-employed, this will typically be your latest finalised accounts showing a year’s income. This should preferably be prepared by a certified or chartered accountant. You might also be asked for SA302 forms which are a summary of your income reported to HMRC.
3. Bank Statements: Lenders will usually ask for 3-6 months of personal and business bank statements. This allows them to check your income and outgoings.
4. Credit Report: While you won’t provide this yourself, lenders will check your credit history to assess your creditworthiness. Make sure you check your own report before applying so you know what they’ll see.
5. Details of your Business: You may be asked to provide additional information about your business, such as its nature, trading history, and future contracts or projects.
6. Proof of Deposit: You’ll need to provide evidence of your deposit and where it has come from.
7. Details of the Property: Information about the property you wish to buy will also be needed.
8. Other Documentation: Depending on the lender, you may also need to provide other documents, such as proof of any financial commitments (e.g., loans, credit cards) or evidence of ongoing contracts if you’re a contractor.
Yes, specialist lenders can be safe, provided they are authorised and regulated by the appropriate financial regulatory bodies. In the UK, this would be the Financial Conduct Authority (FCA).
Specialist lenders often cater to sections of the market that mainstream lenders do not, such as individuals with poor credit history, those with non-standard income patterns, or people with only one year’s accounts. They often have more flexible lending criteria and a more personalised approach to assessing applications.
However, it’s important to do your research when considering any lender, specialist or otherwise:
1. Check Their Credentials: Make sure the lender is authorised and regulated by the FCA. You can search the FCA’s Financial Services Register to confirm this.
2. Research Their Reputation: Look at reviews and testimonials from other customers. Check how they handle complaints and if they have a record of fair dealings.
3. Understand the Product: Be clear about the terms and conditions of the mortgage. What are the rates? Are there any penalties for early repayment? What happens if you miss a payment?
4. Seek Professional Advice: A mortgage broker or financial adviser can provide valuable insight and help you navigate the market.
Several lenders in the UK will consider mortgage applications from those with just one year’s accounts.
1. Halifax: They consider applications from self-employed individuals with a minimum of one year’s accounts.
2. Precise Mortgages: They may consider applications with one year’s accounts, especially for buy-to-let mortgages.
3. Metro Bank: This lender also accepts applications from self-employed individuals with a minimum of one year’s accounts.
4. Kensington Mortgages: Kensington considers self-employed applicants with just a year of accounts.
5. Bluestone Mortgages: They cater to a wide range of circumstances, including self-employed with one year’s accounts.
6. Pepper Money: They accept one year’s accounts from self-employed or contractors.
7. Clydesdale Bank/Yorkshire Bank: These banks have also been known to accept one year’s accounts in certain circumstances.
The specifics of your application – including your credit history, the size of your deposit, and the stability of your income – will all affect your eligibility.
Each lender will have their own criteria and will assess each application on its own merits. Therefore, it’s often beneficial to consult with a mortgage broker who understands the market and can guide you towards the most suitable lenders based on your unique circumstances.
When applying for a mortgage with only one year’s accounts, lenders will take a number of factors into consideration:
Income: The primary factor is your income over the past year. They’ll need to see your accounts to verify this. If you’re self-employed, this will generally be the net profit of your business.
Stability of Income: Lenders will also consider the stability of your income. If you have fluctuating income, this could impact the lender’s assessment of your ability to make mortgage repayments consistently.
Credit History: Lenders will look at your credit report to assess your financial behaviour. This includes your history of repaying debts, any defaults or missed payments, and your current outstanding debts.
Deposit: The size of your deposit is also crucial. A larger deposit can often increase your chances of being approved for a mortgage, as it reduces the lender’s risk.
Affordability: Lenders will also take into account your regular outgoings, debts, and living costs to assess whether you can afford the mortgage repayments.
Business Industry and Type: The nature of your work and industry stability can also be assessed, as some sectors are considered riskier than others.
Future Income Prospects: Some lenders might want information on your future income prospects, such as future work contracts or business growth plans.
Interest rates for mortgages can vary greatly depending on a range of factors such as the type of mortgage (fixed, variable, tracker, etc.), the length of the mortgage term, the size of your deposit (or loan-to-value ratio), your credit history, and the specific lender’s criteria.
Average interest rates in the UK were around 5-7% for a fixed-rate mortgage with a substantial deposit. However, those with only one year’s accounts may face higher interest rates due to the perceived higher risk associated with a shorter financial history.
It’s also important to note that interest rates have likely changed and could be influenced by various factors, including changes in the Bank of England base rate, economic conditions, and lender policies.
Keep in mind, specialist lenders who are willing to consider applicants with just one year’s accounts may charge higher interest rates than mainstream lenders.
Obtaining a mortgage when you’ve been trading for less than a year can be challenging. Most lenders prefer to see at least one to three years’ worth of accounts to assess your income and financial stability. The shorter your trading history, the harder it can be to convince a lender that you’re a safe bet for a mortgage, simply because there’s less evidence of your income and business performance.
However, this doesn’t mean it’s impossible. A small number of specialist lenders may consider applications from those who’ve been trading for less than a year, especially if there are mitigating factors such as:
It’s also worth noting that some lenders may be able to consider projected income in their affordability assessment if you’ve been trading for less than a year. However, this is less common and is typically assessed on a case-by-case basis.
Given the complexity of this situation, it would be highly advisable to work with a mortgage broker. They can provide advice tailored to your specific circumstances and can help identify the lenders most likely to consider your application. Also, they can assist in putting together a strong case to present to lenders, including highlighting any mitigating factors.
Lastly, it’s essential to maintain a good credit history, keep your business records and accounts up-to-date and thorough, and aim to save for as large a deposit as possible. Each of these steps can improve your chances of being approved for a mortgage.
A mortgage with only one year’s accounts is typically sought by individuals who have a shorter financial history due to their employment status. This can include:
Self-Employed Individuals: This includes sole traders, freelancers, contractors, and owners of limited companies. Traditional mortgage lenders often ask for two to three years of accounts from self-employed individuals, so those with only one year’s accounts may need to seek out specialist lenders or products.
New Business Owners: People who have recently started their own business might only have one year’s accounts. As with self-employed individuals, this can make obtaining a mortgage more challenging, but not impossible.
People with Changes in Income: Individuals who’ve had a significant change in income in the past year (e.g., a substantial raise, a move from employed to self-employed, or vice versa) might seek this type of mortgage. Lenders will typically assess these applications on a case-by-case basis.
Contract Workers: People who work on a contract basis may not have the consistent income history that most lenders require. However, some lenders will consider these applicants if they have at least one year’s worth of contracts.
How a lender calculates your income for a mortgage application can vary significantly depending on your employment status and the specific lender’s policies. If you’re self-employed or a business owner with only one year’s accounts, here are some general ways lenders may calculate your income:
Self-Employed/Sole Traders: If you’re a sole trader or a partner in a business partnership, lenders usually look at the net profit of your business. So, if your net profit in the last year was £50,000, that’s the income figure that the lender will likely use.
Limited Company Directors: If you own a limited company, you likely pay yourself a combination of salary and dividends. Most lenders will add these two figures together to calculate your total income. Some lenders might also consider retained profits in your business.
Contractors: If you’re a contractor, lenders may annualise your current contract rate to calculate your income. For example, if you earn £400 a day and work five days a week, the lender would calculate your income as £400 * 5 days * 46 weeks (assuming you take six weeks off), resulting in an annual income of £92,000.
When you’re applying for a mortgage, lenders will require certain documents to verify your income. If you’re a self-employed person or business owner with only one year’s accounts, these are the types of documents you can expect to provide:
1. Annual Accounts: These are your most recent annual accounts showing your business income, which should be prepared by a certified or chartered accountant. These give the lender an overview of your business performance over the last year.
2. SA302 Form: This is a tax calculation summary from HM Revenue and Customs (HMRC) which shows your income for the tax year and the tax due on that income. If you file your tax return online, you can print your SA302 directly from your HMRC online account.
3. Tax Year Overview: This is an official HMRC document that shows the tax calculated from your self-assessment tax return, which you can also download from your HMRC online account.
4. Bank Statements: Lenders will likely require at least three months’ worth of bank statements, both personal and business, to verify your income and outgoings.
5. Contract Details (for Contractors): If you’re a contractor, lenders may also require copies of your current and previous work contracts to demonstrate consistent income.
Being declined for a mortgage due to only one year’s worth of accounts can be disappointing, but don’t lose heart. There are several steps you can take after a rejection:
Understand the Reasons for the Rejection: Contact the lender and find out the specific reasons for the rejection. Understanding this can help you make improvements and increase your chances of being accepted next time.
Improve Your Financial Position: Focus on improving your credit score, saving for a larger deposit, and building up your business income. This could make you a more appealing borrower in the future.
Consider Specialist Lenders: Some lenders are more open to providing mortgages to individuals with only one year’s accounts. Working with a mortgage broker can help you identify these lenders.
Seek Advice from a Mortgage Broker: A mortgage broker can provide personalised advice and help navigate the application process. They have knowledge of the lending market and can guide you to lenders who may be more favourable to your situation.
Consider Waiting Another Year: If possible, you might want to consider trading for another year to provide lenders with a more extensive trading history. Having two years of accounts can significantly increase your options.
Mortgage lenders do not typically restrict lending based on the industry or area in which you work. Their primary concern is your ability to repay the loan. However, they do take into account the stability and predictability of your income, which can depend on the sector you work in.
Here are a few key points:
Stable Industries: If you work in an industry considered relatively stable or in high demand, this may be seen as a positive by lenders as it suggests income reliability.
Fluctuating Income: Some industries are characterised by periods of boom and bust, or by seasonal work. This might make your income appear less stable, which could potentially make obtaining a mortgage more challenging. However, some lenders specialise in these types of scenarios.
High-risk Industries: Certain industries might be seen as higher risk, especially in uncertain economic times. If your industry is heavily affected by economic fluctuations, this could impact a lender’s decision.
Professional Occupations: Some lenders offer professional mortgages for occupations like doctors, lawyers, architects, accountants, etc. These are typically seen as stable, well-paying jobs with a clear career progression, and thus lower risk.
Contractors and Freelancers: Contractors, freelancers, or those in the gig economy often have a more challenging time securing a mortgage due to the perceived instability of their income. However, there are specialist lenders who cater to these types of workers.
Whether you should wait until you have three years’ accounts to apply for a mortgage is a decision that depends on your personal circumstances and goals. Here are a few factors to consider:
Market Conditions: If interest rates are low and property prices are favourable, it may be advantageous to apply sooner rather than later, even if you have less than three years’ accounts.
Availability of Lenders: While more mortgage options generally become available once you have two to three years’ accounts, there are lenders who will consider applications with only one year’s accounts.
Financial Stability: If your business income has been steadily increasing over the past year and is likely to continue doing so, you might have a reasonable chance of obtaining a mortgage with one year’s accounts. Conversely, if your income fluctuates significantly, waiting until you have more years of accounts could provide a more stable picture of your income.
Urgency: If you urgently need to move or buy a house (for instance, due to a growing family or a job relocation), waiting may not be an option.
Larger Deposit: If you can save a larger deposit while waiting for more years’ accounts, this could be beneficial as it reduces the lender’s risk and may help you access better mortgage deals.
Ultimately, the decision should be made in consultation with a financial advisor or mortgage broker who understands your unique circumstances. They can help guide you through the process and provide advice tailored to your situation.
Getting a mortgage with only one year’s accounts and a bad credit history can be challenging, but it’s not impossible. Your options may be limited, but there are specialist lenders who work with applicants in these situations. Here are some steps you can take:
Improve Your Credit Score: First, focus on improving your credit score as much as you can. You can do this by making sure you’re on the electoral roll, paying all your bills on time, reducing outstanding debts, and not applying for new credit in the run-up to your mortgage application.
Save a Larger Deposit: The larger your deposit, the less risk the lender takes on, which could make them more willing to offer you a mortgage despite your bad credit.
Use a Guarantor: If possible, consider a guarantor mortgage, where a family member or close friend guarantees to cover your mortgage payments if you’re unable to.
Consult a Mortgage Broker: A broker who specialises in bad credit mortgages can help you find a lender who is willing to work with your situation. They can also advise you on improving your chances of getting approved.
Be Honest and Open: When applying, be honest about your credit history. Lenders will find out anyway when they do a credit check, and being upfront shows that you’re serious about managing your finances responsibly.
Yes, it is possible to get a buy-to-let mortgage with one year’s accounts, but it can be a bit more challenging. The main concern for lenders is whether or not you can afford the mortgage repayments.
Buy-to-let mortgages are slightly different from residential mortgages. The lender will consider your personal income, but they will also assess the potential rental income from the property. They usually want the rental income to be 125-145% of the mortgage payments, depending on the lender’s criteria.
As with residential mortgages, most mainstream lenders prefer applicants to have at least two to three years’ accounts to demonstrate a steady income. However, some lenders will consider those with only one year’s accounts, especially if your credit history is good and you have a solid track record in property investment or a stable job alongside your self-employment.
Working with a mortgage broker who has experience with buy-to-let mortgages for self-employed individuals can be beneficial. They can help you navigate the lending landscape and point you to lenders more likely to consider your application. Remember, each lender’s criteria differ, so it’s important to speak with an expert to understand your options
Yes, it’s possible to qualify for a joint mortgage with only one year’s accounts, especially if the other applicant has a stable, regular income and a good credit history. Here’s what you need to know:
A joint mortgage is a loan that is taken out by two or more people. Lenders will look at the financial situation of all applicants when deciding whether to approve the loan. This means if one applicant has a strong financial profile (like a stable job, good income, and excellent credit score), it can help balance out the risk associated with another applicant who has a less conventional income situation, like being self-employed with only one year’s accounts.
While it’s possible to get approved with only one year’s accounts, keep in mind that not all lenders will be willing to do so. Working with a mortgage broker can help you identify the lenders who are most likely to consider your application and guide you through the process.
Yes, it’s possible to remortgage with only one year’s accounts, but it may be more challenging. Just like with a first-time mortgage, lenders want to see evidence that you can manage the loan and make repayments on time. They usually prefer to see two to three years’ worth of accounts to give them a clear picture of your income.
Here are a few tips to improve your chances:
Good Records: Make sure your accounts are up-to-date and detailed. This helps show lenders that you’re organised and serious about your business.
Use an Accountant: Accounts prepared by a certified or chartered accountant can give lenders more confidence in your income figures.
Improve Your Credit Score: Having a good credit score can greatly improve your chances of securing a mortgage.
Equity: If you have a good amount of equity in your property (meaning your property’s value is significantly higher than your current mortgage balance), this could increase your chances of being approved.
Seek Specialist Help: Some lenders are more comfortable than others when it comes to lending to the self-employed or those with short trading histories. A mortgage broker who specialises in cases like yours can help find these lenders.
Consider Waiting: If you’re not in a hurry to remortgage, it might be worth waiting until you have more years’ worth of accounts, as this could give you access to more lenders and potentially better deals.
Yes, it’s possible to get a self-employed mortgage with only one year’s accounts, but it can be more difficult compared to those with a longer history of self-employment. Traditional mortgage lenders often prefer to see at least two to three years’ worth of accounts to assess income stability.
While it may be more difficult to secure a mortgage with only one year’s accounts, it’s certainly not impossible. You may have to do a bit more work to prove to lenders that you’re a reliable borrower, but with persistence and the right advice, you should be able to secure a mortgage.
If you’re having difficulty getting a mortgage with only one year’s accounts, don’t worry. There are several alternatives you could consider:
1. Wait Until You Have More Accounts: If you’re not in a rush to buy a property, you could wait another year or two until you have more years’ worth of accounts to show lenders. This could increase your chances of being approved for a mortgage.
2. Joint Mortgage: If you have a partner or family member who has a stable income and a good credit history, you could consider applying for a mortgage together. The other person’s financial stability could help to balance out the perceived risk of your self-employment.
3. Guarantor Mortgage: Another option might be to get a guarantor mortgage. This is where a third party (usually a family member) agrees to cover your mortgage payments if you can’t. This provides extra security for the lender.
Securing a mortgage with only one year’s accounts can be a bit difficult, but it’s certainly not impossible. Here are some tips on how you can improve your chances:
1. Maintain Accurate Financial Records: Detailed and accurate financial records can show lenders that you are serious about managing your finances.
2. Hire a Certified or Chartered Accountant: If you have your accounts prepared by a certified or chartered accountant, it can give more credibility to your financial records in the eyes of lenders.
3. Boost Your Credit Score: A strong credit score can make a big difference. Ensure all your bills are paid on time, reduce your credit card balances, and avoid applying for new credit in the months leading up to your mortgage application.
4. Save for a Larger Deposit: The more money you can put down as a deposit, the lower the risk for the lender. This can increase your chances of getting a mortgage approval.
5. Minimise Your Debt: The less debt you have, the better. Lenders look at your debt-to-income ratio, which is how much of your income goes towards debt repayment. If this ratio is high, it can make lenders hesitant.
6. Show Consistent Income: If you can show that your income has been consistent or increasing, even over a year, this can reassure lenders that you’re able to manage your mortgage payments.
7. Consider Specialist Lenders: Some lenders are more accustomed to working with the self-employed or those with short trading histories. A mortgage broker can help find these lenders.
8. Prepare a Business Plan: If you can present a solid business plan that shows the potential for future earnings, this can also help to reassure lenders.