If you are self employed and looking for a Mortgage, it is most likely that you are finding most Mortgage lenders want you to have 2 or 3 years accounts or self assessments. This post is for people who either only have one years accounts or are looking to use just the latest years figures.
There is a large portion of the UK working population who are self employed and only have one years accounts. Typically these people fall in to one of the following categories:
- New start up trading for one year where things are going well enough to think about a mortgage.
- You are working for an existing company on a self employed contract (possibly a contractor).
- You have purchased an existing business but only have one years trading with you at the helm.
None of these in themselves are deal breakers when looking to get a mortgage so you are safe to read on.
Mortgage options with 1 years trading accounts
Your options will however vary depending on a number of different factors. As a general rule of thumb, you will need a 15% deposit and can expect to pay rates of around 1% above the high street.
However… What we try to do is to understand your business set up and delve a little deeper to see if there is anything we can use to get you “normal” rates. Sometimes there are lenders out there who typically need more than one years accounts who can make exceptions in the right circumstances.
A real life example: A customer of ours had bought a business that had been trading for 20 years. Prior to purchasing the business, he had done a similar job (employed) albeit abroad. Once he had been trading for 12-13 months and we had his one years figures, we were able to find a lender who would accept the accounts and a letter from his accountant to confirm there was no reason for the business to do anything other than grow under his ownership. Outcome: We were able to get him the cheapest 3 year fixed rate deal on the market at the time from a lender who ordinarily would want 2 years accounts. The rate payable was 2.19% rather than what would have been in excess of 3.5% had we needed to use a specialist lender.
In the example above the plus points were:
- The customer had experience in the industry which despite being abroad, we could evidence.
- The business had been trading for a long time before he bought the business.
- In addition, we were able to evidence with his one years accounts that the business had actually grown since he took over as he had the passion the previous owner did not have after 20 years.
When looking at the lenders website for their criteria, this case did not fit. They needed a minimum 2 years accounts with the owner at the helm. However, because we were able to put across a good explanation of why this case was worth them considering, they took a more detailed look at the case and they agreed with our assessment that it was a good case for them.
Realistically, this will not happen with every case. As we have been going since 2013, we are experienced and we know what might have a chance of getting through at normal rates and what may end needing to settle for the more specialist rates or holding fire for 12 months.
Can I get a Mortgage using just my latest years income?
This is a slightly different twist on getting accounts if you only have one years accounts. You may have 2 or 3 years accounts but previous years income was lower for whatever reason. The options where this is the case will vary.
If the reason for the significantly higher income is just a general upturn in business, then we are probably going to be using the same lenders as someone who has just the one years accounts as there is not a long enough history to evidence the higher income.
If there is a reason for a lower income in previous years, examples could be:
- Purchasing expensive machinery,
- You took time off due to ill health,
- There were roadworks outside your business maybe,
- In essence, it there is a reason that can be evidenced, we can consider it.
We can discuss this kind of thing with underwriters, we may need previous years accounts to show a dip in income or an accountants reference potentially but this is where a good Mortgage broker can come in to their own and with a little bit of effort and “packaging” from us, we could possibly look to get you normal rates. We need to understand the story and it may take a little more time, but ultimately if we can save you 1-2% on the rate, it can be worth putting the effort in.
How can Mortgage Success help?
What we try to do is to ask enough questions upfront to give you an idea of what could be possible if we get lucky but what to work from as a “worst case scenario”. At least then when looking at the options you can decide whether to give it a try or wait – there is certainly no arm bending from our side, it is down to you to decide what is best for you going forward. We will just put your options out so you can decide.
Our job is to work with you to get you the best deal we can or lay out a plan to get to where you want to be if your current options do not work for you. Call us up for a chat to see what we can do.