This post is inspired by a recent meeting with one of our account managers. After 12 years of doing this job, I am still learning new things.
Can I get a mortgage with 1 years accounts?
In short, yes. But there are a lot of details that can affect your options (and cost!). So if you want more than a yes or no answer, please read on…
Have you been a sole trader for 1 year?
If you are a sole trader, there are lenders who will just use your one years figures. Most of those lenders are non high street lenders which will mean higher interest rates.
However there has always been a lender with normal rates who can consider them, a good example is here or here… We have plenty more of those!
Following my recent meeting, there is another lender however who can consider a sole trader with one years accounts at normal rates but only where you either:
a) have experience in the industry. – for example, if you had worked as a hairdresser on an employed basis but then set up on your own, they would consider you. Or,
b) work in a professional capacity. An example here would be an accountant, solicitor, Doctor etc its unlikely in those highly qualified industries your income will drop below what you earn in your first year.
Has your Ltd Company been trading for 1 year?
Not too disimilar to the above, there have always been lenders who will work from one years accounts for limited companies.
However there is some additional flexibility with limited companies in that we can look at using PAYE and Dividend income or PAYE and share of net profit income. So if you are leaving money in the business to build up a rainy day fund or for tax reasons, thats ok.
We would be looking to use the figures on a self assessment or company accounts. At high street rates we now have 2 lenders but one of those lenders like above would require either experience in the same/similar role or working as a professional.
Beyond those lenders however, we do also have other lenders but it may be that rates go up.
Trading more than 1 year but using the latest years figures
This is slightly different to the above and so the answer will slightly differ too. Where you have more than one years accounts, most lenders will average out the last 2 years and use that figure assuming the figures are increasing. Where they are decreasing most lenders will use the lowest figure.
However, there are exceptions to this. Where incomes are going up, there are lenders who will use the latest years figures even if there is a large increase but the large increase can be explained.
Likewise with a decrease, there are lenders who may look to use the average rather than the lowest if there has been a drop in income – but again there needs to be an explanation.
Summary
Over the years we have been able to help many people with just one years accounts – from Tattoo artists through to Golf professionals and other less exciting occupations.
We have access to around 80 mortgage lenders and all have their pros and cons. Its always worth a conversation as you never know what we can do until you check. As mentioned at the beginning, even after 13 years as a broker, I am still learning new things.