Whether you are a limited company director with one year’s accounts or a sole trader with one year’s tax return, speaking to a self-employed mortgage specialist is key in arranging the mortgage you need.
Most lenders require a minimum self-employed period before they consider offering a mortgage (i.e. 2 – 3 years). The reason is that they want to see more of a track record as they perceive self-employed applicants to be higher risk.
The problem here is that many successful self-employed professionals who are looking for a mortgage during the early years of starting their business may not have more than one year’s accounts.
This means that many perfectly good self-employed borrowers are being refused by mortgage lenders and being prevented from arranging the mortgage they need. This can include self-employed professionals who have recently moved from being a sole trader (with a good track record) to a limited company (for tax efficiency).
However, the good news is that by speaking with a self-employed mortgage specialist with the right knowledge, you can get the right mortgage advice and the desired result.
Contrary to popular belief, there are a few high street lenders who will consider offering self-employed mortgages with one year’s accounts (although they don’t publish this in their standard criteria). Underwriting can take a little longer as there will be more checks around employment history and whether the business looks financially viable moving forward. The key here is presentation combined with specialist knowledge of what each lender is looking for.
Although approaching high street lenders may take a little more work, we believe it’s important to explore this before looking at more specialist lenders as this could save you a good amount of money in both rates and fees.
If you have been a sole trader who has recently changed to a limited company and only has one year’s accounts, there are some high street lenders who don’t accept this. However, there are some who will take a sensible view, especially if the line of business has been consistent.
If high street lenders consider your application to be too high a risk, there are specialist lenders who take one year’s accounts as standard. As they specialise in the field, they are prepared to take on what the high street sees as a higher risk, but this will be reflected in the rate. This isn’t an issue as long as the monthly payments are comfortably affordable, especially as the short-term plan would be to switch to a high street lender when more accounts are available (i.e. after 2 years).
To summarise, the good news is that there are options available for self-employed people with one year’s accounts looking for a mortgage. However, to improve the chances of success, specialist advice is recommended to ensure that you get the best deal and more importantly, the desired result.