Mortgages for self-employed with 1 year’s accounts
If you are registered as self-employed, getting a mortgage might not be as straightforward as it would be if you are in full time employment. It can be even more challenging to obtain a mortgage for self employed if you only have one year of accounts, as most mortgage lenders will ask for at least three years. However, it is still possible, especially with our help.
At Finance Surgery, we have advisors available who are well trained in dealing with mortgage loans for self employed and will talk you through the process, ensuring you get good value for your money.
We understand that it can be worrying if you are self-employed and want to get a mortgage and we will work with you, putting you in touch with the most appropriate mortgage lenders. We know lenders that will consider offering you a mortgage when you are self-employed with one year’s accounts and sometimes, even less than this.
Why is it difficult to get a mortgage when self-employed with 1 year’s accounts ?
The main concern for a mortgage lender when offering a mortgage loan for self employed is that you can afford to pay it back. When you are self-employed, it can be difficult to obtain a mortgage as your earnings will usually be variable month on month. If you have been self employed for over three years’, you are more likely to be accepted for a mortgage as the lender can see that you have stable earnings.
It is more difficult with self employed accounts for less than three years, as mortgage lenders view you as a risk. The situation has become worse since the recession, as you need proof of your income.
The self-employed market is increasing, which adds further difficulties with obtaining a mortgage. It is not impossible though, as some lenders are more lenient than others, and this is where we can help at Finance Surgery. We know the right mortgage lenders for self-employed who are more likely to accept you for a mortgage.
Most mortgage lenders who offer mortgages for self employed will not require that you work in a specific sector. It is more important that you have a stable income and you can afford to pay your mortgage.
Some of the common self-employed occupations accepted for mortgages for self employed include taxi drivers, tradesmen, musicians, online workers, retailers and many more. The occupation and sector are not important to mortgage lenders, but your affordability certainly is!
Most lenders will offer you the same mortgage as they would if you were employed, although it will be dependent on your income and your credit score. The maximum is usually 5 times your income, although it may be slightly more, depending on your earnings. If you have only one year of accounts, the mortgage lender may look at income projection, based on your earnings for that year.
Your accountant may be able to demonstrate your expected income, which could make it easier to get a higher mortgage. However, it is never guaranteed, every lender is different in what they offer. Some have tighter restrictions than others.
When a mortgage lender is assessing you for a mortgage loan for self-employed, they will usually want you to proof of your income from a qualified accountant. Most lenders will understand that this will be a bit difficult if you are a sole trader and do your own accounts, so they may be a little less restrictive in these cases.
It depends on the mortgage lender and what their assessment process involves. The proof of income will include either your finalised accounts or a self-assessment tax return. The mortgage lender will then determine whether you will be approved and how much they will be willing to lend – usually up to five times your income.
Mortgage lenders tend to calculate self employed workers in the same way, regardless of how long you have been trading. If you are a sole trader looking for a mortgage, your income will be calculated based on your total income. This will then be assessed to determine your mortgage value.
If you work as part of a partnership, the same applies, although it will be based on your share of the profit. As a director (limited company), your income for mortgage loans for self employed will be assessed using your salary and any dividend received. This information would be taken from your accounts.
If you have bad credit and are also self-employed, with only one year of accounts, it will obviously be more difficult to find mortgage lenders who will be willing to accept your application. However, it is not impossible. The main obstacle for these kinds of mortgages for self-employed, is that they will expect you to put down a larger deposit. You may be required to have at least a 15% deposit and most mortgage lenders will expect that you have had no defaults, CCJ’s or other mortgage arrears in the last two years.
If you have some late payments, you may still be considered, depending on the type of credit. Mobile phone issues tend to be ignored by lenders, but if you have missed payments on your rent, this would not be favourable to a mortgage lender. The mortgage lender does not want to put themselves at risk, so if you can show you have kept your accounts in decent order and you have a good deposit to put down, it will be easier to be accepted.
Mortgage lenders usually all have different criteria with their lending, and therefore there is no reason to feel you will be excluded from getting a mortgage. At Finance Surgery, we know the right mortgage lenders for self employed and we will work with you to ensure you get the mortgage most suited to your own circumstances. We work with a range of mortgage lenders, who base their decision on a range of criteria, including your credit history, employment status etc.
We know the mortgage lenders who will be able to offer you a mortgage, regardless of your circumstances. We have helped those who are self employed with accounts of less than three years to obtain mortgages.
Help to buy mortgages were introduced by the UK government to help individuals who might not be able to afford the large deposits required to buy a home. A help to buy mortgage will allow you to buy the home with a smaller deposit, usually around 5%*. The government helps by offering 20% of the value as a loan, which means you have 25% deposit to put down, and the mortgage would be the balance of 75%*.
There is no interest on the loan initially, but you will pay 1.75% after five years*. This will increase each year, based on RPI. Help to buy mortgages are extremely helpful for those who are finding it difficult to obtain a mortgage.
It can be less straightforward to get a help to buy mortgage if you are self-employed, especially with only one year of accounts, but it is not impossible. There are lenders who specialise in mortgages for self employed and will be willing to offer it with just a 5% deposit*. Of course, they will take other aspects into account, including your credit history, but it is possible to get a help to buy mortgage.
We understand the complications of getting access to credit when you are self-employed, especially if you have less than three years’ worth of accounts. Our experienced advisors have worked with hundreds of people in the same position, so they are in a great place to be able to help you.
We would work with you on your application to ensure it truly reflects your circumstances and shows your ability to pay the mortgage. We know how complicated it can seem when you are trying to apply for a mortgage, and we will try to do everything we can to make it as simple as possible for you.
No matter what your circumstances may be, even if you have bad credit and feel there is no possibility to get a mortgage, we can help. If you want to find the right mortgage lender for you, speak to us today.
*https://www.moneysavingexpert.com/mortgages/mortgage-schemes/