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How Many Years of Books Do You Need for a Self-Employed Mortgage?

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Self-employment can be a rewarding and fulfilling career choice, but it can also present some challenges when it comes to getting a mortgage. One of the biggest hurdles self-employed individuals face when applying for a mortgage is proving their income. Lenders are required by regulation to ask for proof of income to ensure that borrowers have the ability to repay the loan. This typically means providing details of your accounts from the last two or three years. But what if you haven’t been self-employed that long?

At Active Mortgages, we understand that the self-employment landscape is constantly changing and that more people than ever are becoming freelancers, contractors, or setting up their own limited companies. That’s why we want to help you navigate the process of getting a mortgage with only one year’s accounts.

How Long Do You Need to Be Self-Employed to Get a Mortgage?

Many lenders require three years of business accounts to prove income, but it is possible to get a mortgage with only one year’s accounts. While it may be more difficult to find a lender that will approve your application, it can be done. You may need to shop around, possibly via a mortgage broker, to find a lender that is willing to work with you.

Can You Get a Mortgage with One Year’s Accounts?

This will depend on the lender you use. Most lenders will ask for three years of accounts, often certified by an accountant. However, in certain circumstances, it may be possible to get a mortgage with only one year’s trading figures. A lender will ask for more information if you have only one year of accounts. They may also ask for projections, assets, and information about your employment before you started your own business.

Providing a larger than average deposit or level of equity to invest in the property can help the lender feel more comfortable with the risk of lending to you. Showing your commitment to the mortgage in this way may also secure a better interest rate.

Lenders will usually use either your accounts or your self-assessment SA302 year-end tax calculation as evidence of your income. If using your accounts, most will require them to have been prepared by a certified or chartered accountant.

How Much Can You Borrow with One Year’s Accounts?

Whether you are employed or self-employed, you can normally borrow a maximum of the equivalent of five times your proven annual income, although some lenders may consider less, such as the equivalent of 4 or 4.5. With one year’s accounts, you may be required to have a deposit of at least 10% (or equivalent equity, if remortgaging) and the lender will look for a good credit history.

Can You Get a Mortgage with One Year’s Accounts if You Have Bad Credit?

A lender would normally expect a borrower to have no mortgage arrears or county court judgments (CCJs) against them for a period of two years prior to the date of application. However, if your record shows limited missed and/or late payments in the previous year against credit card bills or store cards, then they may still consider your application.

Can You Remortgage with One Year’s Accounts?

Just like getting a mortgage when you are self-employed, it’s also possible to remortgage using only one year’s accounts. The process will be similar to a remortgage if you were employed, although there may be a stronger case for sticking with your current lender, as they will already know that you are keeping up with mortgage repayments and have access to your history as a borrower.

At Active Mortgages, we have a team of experienced mortgage brokers who can help you navigate the self-employed mortgage process. We understand the challenges you may face and are here to help you find a solution that works for you. Contact us today to learn more.

If you’re self-employed and thinking about buying a home, Speak to an Active Adviser today and take the first steps towards homeownership.

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Self Employed Mortgage Guide

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Book a call with one of our team to talk about your requirements.