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Mortgage with 1 year’s accounts

Last updated on 17th August 2023 by Martin Alexander

We’re often asked whether a mortgage with 1 year’s accounts is possible. The short answer is yes, it’s possible to get a mortgage if you’ve only been self-employed for 1 year.

The following mortgages are possible with 1 year of accounts:

  • Companies trading for 1 year
  • Sole traders self-employed for 1 year
  • Self-employed buy to let mortgages
  • Businesses with recent changes in company structure
  • Mortgages for contractors and freelancers
  • Self-employed for 1 year with bad credit
  • Remortgages for business investment

How can I get a mortgage with 1 year’s accounts?

You may need a specialist lender if you’ve only got accounts for 1 year. This is because you’ll be seen as a high-risk applicant, due to you recently becoming self-employed. Lenders on the high street are much more restricted and as a result, are likely to decline applicants with less than 3 years of accounts.

You can improve your mortgage chances by:

  • Avoid mainstream lenders
  • Apply with a specialist lender
  • Save for a deposit higher than 10%
  • Minimise outstanding debt
  • Provide evidence of a healthy business bank account
  • Show savings in your personal account
  • Having a good credit score

Will the nature of my business affect my mortgage?

The nature of your business is very unlikely to affect your mortgage chances. This is because lenders will make assessments largely on the income of your business. This is to assess the affordability of the mortgage you’re applying for.

A lender’s assessment is based on risk. Proving your business is generating a sustainable income is more important than the nature of your business. It’s very rare that lenders will favour one business over another due to its business type.

Are specialist lenders safe?

It’s important to remember that specialist lenders are designed for really tricky circumstances and are as credible as any other lenders available.

Our advisors have access to the whole market. We work with high-street lenders in addition to specialist lenders too. Each lender, including specialist lenders, is registered and regulated by the Financial Conduct Authority (FCA).

How much can I borrow with 1 year’s accounts?

Please note: A mortgage with 1 year’s accounts will more than likely need a specialist lender. As a result, the information in this section relates to specialist lenders and not mainstream lenders.

Self-employed applicants can generally borrow up to five times their net income. As accounts may not provide an accurate projection of your finances, specialist lenders may consider your current figures in addition to your filed accounts.

For example, you may have been trading for eighteen months. In this case, specialist lenders may assess your income based on accounts for 1 year and the net income for the additional six months.

This is common when your current income is considerably more than what your filed accounts show. Underwriters may request an accountant’s projection of your business income. This can help lenders to project your affordability.

Self-employed mortgage calculator

Use our self-employed calculator to check how much you can borrow. You can also make an enquiry to get a more accurate idea from an advisor.

How will mortgage lenders calculate my income?

Lenders generally assess affordability on the value of your net income. Assessments on mortgages for directors are based on director salaries and dividends (if taken). Some lenders may also consider retained company profits in certain circumstances.

Read more about mortgages for directors here.

What proof of income will lenders require?

Lenders will always request your SA302 documents, which can be downloaded online from the HMRC portal or requested via post. Other lenders may request further proof of income, such as your finalised accounts or an accountant’s reference.

I was declined because I’ve only been trading for 1 year

It’s common for high street lenders to decline applicants who are self-employed with 1 year’s accounts. Prior to the credit crunch, self-employed borrowers were able to ‘self-certify’ their mortgages. Self-certifications were only designed to be used in certain circumstances but were used a lot more than anticipated.

Self-certified mortgages are said to be one of a number of reasons that contributed to the crash in 2007. Fast forward to now, and lenders are extremely careful when assessing mortgages for the self-employed.

Should I wait until I have 3 years’ accounts?

The majority of lenders will require self-employed borrowers to have at least 3 years of accounts. This is because accounts for three years provide lenders with a greater insight into your business and whether they deem your income stable enough to meet mortgage payments.

Applicants with 3 years’ accounts often have access to the same mortgage products as employed applicants. Fewer lenders consider self-employed mortgages with 2 years accounts. The more financial history, the better!

Getting a mortgage with one year’s accounts will likely require a specialist lender. You may also need an expert advisor to find a lender, as it isn’t an easy task.

Can I get a mortgage with 1 year’s accounts and bad credit?

Although each situation is unique, it is possible to get a mortgage with 1 year’s accounts and bad credit. You will be restricted in the market, but having the right advisor and applying with a suitable lender is crucial. You’ll likely need a deposit of at least 15% with minor adverse credit issues. You may require a higher deposit for more severe credit issues.

Attempting to get a mortgage with accounts for 1 year and bad credit will mean your mortgage rate will be higher than average. Specialist lenders may also charge you higher fees in order to minimise their risk.

If approved for a mortgage, you can repair your credit score with time. Once your credit is repaired, you can remortgage to a much lower rate. As each case is different, we’d highly advise you to speak to an advisor with experience in credit issues. This will allow your broker to assess your case and tell you the honest likelihood of you being approved for a mortgage.

Is it possible to remortgage?

A remortgage is very similar to applying for a new mortgage, as in theory, that’s exactly what it is. The information in this guide can also be related to a remortgage with one year’s accounts.

The main difference when remortgaging when self-employed is that lenders will assess whether you have equity in your property. You’ll need equity to remortgage, especially if you want to release equity. A track record of making repayments on time can also show lenders that you’re in control of your finances. Remortgaging can be easier for these reasons.

I need a mortgage with 1 year’s accounts

If you’re self-employed and need a mortgage, our expert advisors can help answer any questions you may have. You can make a quick enquiry, and an expert will contact you as soon as possible.

About the author

Martin Alexander
Senior Mortgage Advisor

Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.