Mortgages with One Years’ Accounts

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Mortgages with One Years’ Accounts

Mortgage with One Years Accounts

Paul Holland talks us through mortgages with one year’s accounts.

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Can I get a mortgage with one year’s accounts?

Yes you can. There are definitely lenders out there who will accept applicants who only have one year’s accounts for their business. It’s important to caveat that though – you’ll need to have been self-employed for 12 months. Some people might think having one set of accounts means they can submit a partial year, which isn’t the case. 

As long as you’ve been self-employed for 12 months and have that first set of accounts then there are a handful of lenders that will even offer competitive rates.

How do I prove my income with one year’s accounts? 

If you’re being assessed as a self-employed person, there are different headings you might come under. 

The most common is a sole trader, in which case you will need an SA302. This is a document that HMRC will provide to you once you submit your first set of accounts. It’s also known as a tax calculation or a tax computation. These are all the same document and they all come with a corresponding tax year overview document. It’s almost like a bill and then a receipt – the SA302 being the bill and the overview the receipt. 

If you’ve got a limited company you will need those things but also a set of company accounts. If you’re a contractor you’ll need a copy of your current contract and probably the previous one. You might be paid through an umbrella company,  in which case you may receive monthly pay slips – you’ll need to supply these too.

How much can I borrow with one year’s accounts?

The lender is going to arrive at a number that’s very similar to what they’d offer if you were employed. Lenders look at that yearly income figure to calculate affordability. 

As a rough indication, you will usually be able to borrow around four and a half times your income. Then, that overall loan is going to be chipped away depending on various factors – things like your other commitments, dependants, monthly expenditure, your age and things like that.

Can I remortgage with one year’s accounts?

A property purchase with one set of accounts is going to be treated exactly the same as a remortgage with one year’s accounts. There’s no difference. 

Can I get a Help to Buy mortgage with one year’s accounts?

Unless you complete before March 2023, you’re not going to be able to use the current Help to Buy scheme as it’s coming to an end. If you are looking at a property that’s already built and you’re ready to buy right now, that’s the only way you will be able to access Help to Buy. 

Still, the answer is yes – a lender will consider you. They will assess your income from a self-employed perspective and then apply it to the Help to Buy application. But the scheme is expiring in March next year so there’s a good chance you won’t make the cutoff.

If I have bad credit can I still get a mortgage with one year’s accounts?

People might have experienced issues around their credit situation over the last couple of years with various things going on in the background. So we’re seeing a little more lenience from lenders. People may have missed a payment or two during Covid times. 

Generally criteria like being self-employed or having bad credit are assessed separately from one another. There are lenders out there that will lend to people with one set of accounts who are also lenient when it comes to credit issues. So it doesn’t mean that you’re going to struggle. It’s really going to depend on the details.

Are there many lenders that offer mortgages with one year’s accounts?

There are somewhere between 10 and 20 lenders that wouldn’t say no to you just because you’ve only got one set of accounts. Halifax is a big high street bank with competitive rates, and its current criteria states that you can apply for a mortgage with one set of accounts. 

So there are a fair few lenders out there and a handful of those are going to be competitive as well. That means you’re not necessarily having to go to a lender with a much higher rate just because you’ve put one set of accounts – which is obviously a positive.

How do I apply for a mortgage with one year’s accounts? 

It’s really important for you to speak with a broker that knows what they’re talking about. There are over a hundred different lenders, less than 20 of which are going to accept people with one set of accounts. 

You’ll want to achieve the most competitive rate within those – and generally speaking people bring more than one criteria glitch to the table, as well. By the time we’ve gone through a fact-find with you to understand your situation there might only be three or four suitable lenders to approach. 

It’s so important to pick the right one – and the best way to do that is to speak to someone that specialises in that arena, which is exactly what we do. We specialise in that self-employed world.

A final point for self-employed people is to make sure you are well prepared. Most people will know if they’re expecting to go self-employed at some point in the near future. It might be worth having a chat with a broker at that point, especially if you might be looking to get a mortgage in the next year or so. 

You might well have a mortgage that’s coming to an end – if you think you might jump to a new lender at that stage, timing is key. You can coordinate things to make sure you’ve got your accounts ready and have spoken to your accountant. That way you will have an easier time when it comes to your mortgage.

Your home may be repossessed if you do not keep up repayments on your mortgage.