Being your own boss? Amazing, truly the dream come true for many. But securing a mortgage with 1 year’s account? A bit tougher but not the hardest. Lenders in the UK usually prefer applicants who can show two to three years of accounts so they can comfortably assess your income stability. The good news is that self-employed mortgages with 1 year’s accounts​ are becoming more and more common with flexible lenders and tailored deals.

On this page, we will discuss the ins and outs of mortgages for self-employed with 1 year’s accounts​ so that we can simply quench your curiosity or in the long run, make your mortgage journey a little smoother.

Mortgages for self-employed with 1 year’s accounts

Lenders often view self-employed applicants as higher risk. However, this doesn’t reduce your chances of approval; it simply means your income will be examined more closely. Now this can easily be tackled with healthy accounts but since we have only 1 year’s of them, the lender needs confidence that you have a sustainable business model along with a reliable income to afford the monthly payments.

In the UK, lenders typically look for two to three years of account. If you are unwilling to wait for that long, you can take the help of a broker and find a more flexible lender to secure loans. The challenge you have to overcome is proving you have a stable income despite the brief track record. 

What Lenders Look For

To secure mortgages for self-employed with 1 year’s accounts, you need to be top-notch with your other documents which prove that your financial profile is healthy. Here are a few things you may need to show, which vary according to the lender’s policy:

• Filed Accounts: At least one year of full accounts is required to be shown to the lender. It would be ideal to get it signed by a qualified accountant. Lenders are willing to overlook the time period if your accounts show strength in case of profitability and consistency. 
• Tax Overview: In the UK, SA302 provides evidence of earnings. If you are self-employed or a company director, you must have completed the form for self-assessment tax return. With the help of this form, lenders will understand your tax payments and get more insights into your overall income profile.  
• Credit Score: Lenders want to know your financial management skills and credit score reflects exactly that. A high score means that you don’t have a history of missed payments or high debts. 
• Proof of Future Earnings: This proof helps lenders understand that your self-employment means business and you are in it for the long run. You can present them with contracts, investments, or invoices that indicate future earnings. 
• Bank Statements: Allow lenders to see the full picture of finances by providing them with bank statements, personal or business. They can assess the cash flow, incoming payments, and most importantly, your ability to manage expenses effectively. 

Flexible Lenders

Conventional lenders or high street banks may show hesitation to offer self-employed mortgages with 1 year’s accounts​. Limited accounts can equal high risk in a typical mortgage setting. Thankfully, the mortgage market has adapted itself to the various circumstances of people. Nowadays, specialist mortgage brokers and lenders in the UK work with self-employed individuals, even with one year of accounts.

An appropriate step to take in unique situations like a limited record of accounts is to get help from a mortgage broker who can find you the best possible deal. Flexible lenders are more open to your future income potential and do not expect that you have everything sorted right at the moment.  

What You Can Do

To boost your approval odds to secure a self-employed mortgage with 1 year’s accounts, you can do a few things on your own to make up for the limited record.

• Offer a larger deposit. The larger the deposit, the more secure your lender will be as it means you are borrowing a smaller amount of money. Therefore, saving up for a large deposit is worth it but if you are facing issues, consider asking for a gifted deposit from a loved one, which is a route many young professionals are opting for.

1. Maintain or build a strong credit score. If you have a high score, ensure it remains high by paying off outstanding debts and avoiding missed payments. If your credit is on the lower end, it is time to build it. You can take a secured or a low-limit credit card. Use it responsibly by keeping the balance low and making sure to pay off the full amount each month. 
2. Work with a specialist broker. Their guidance and help can be invaluable in securing mortgages for self-employed with 1 year’s accounts​. They have access to a wide range of products that common people may not find. Therefore, connecting with a broker can lead you to flexible and lenient lenders. 
3. Work with an accountant. A qualified accountant can certify your accounts, which looks pretty good to the lenders. This is because accountants take time to ensure that your financial documents are accurate and present your income in the best possible light. They do half of the assessment job for the lender. 
4. Prepare well in advance. Make sure you have all the necessary paperwork ready ahead of time and that they are correctly recorded. Apart from the documents we mentioned, check if your lender requires anything else. A well-organised application makes you look like a responsible candidate and can speed up the process. 

Recent Shifts

Covid-19 impacted the world in several ways for more than two years. In the UK, with it came tumultuous economic fluctuations. The number of self-employed individuals in the UK was approximately 4.6 million in 2020. By 2021, this number had decreased to around 4.2 million. Small businesses took a hit and struggled to stay afloat. 

While the self-employment journey itself is hard, only 1 year of account doesn’t help. But as the world is recovering from the impact of the pandemic, small businesses are blooming again and the mortgage market’s hesitancy is also declining when it comes to self-employed borrowers as many are showing up with healthy credit profiles in general. With the right strategy, a mortgage for self-employed with 1 year’s accounts is a few steps away for you as well. 

Conclusion

Being self-employed is something to be proud of, and 1 year’s accounts should not stand between you and your dream. While there may be some extra legwork, it all boils down to playing smart: partner with the right professionals, get your finances in line, and then eventually find a suitable lender who understands you and your situation. 

Don’t let the “one-year” hurdle hold you back. You’ve built your business from the ground up; so securing a mortgage for self-employed is just another milestone on your journey. Our team at UK Mortgage Finder are experts in self-employed applicants with one year of accounts. Contact us today and discover a lender who sees potential, not just paperwork.