I am Self Employed, How Many Years Accounts Do I Need To Get A Mortgage?

Posted on: November 15, 2023

In the UK, there are around 4.8 million people who are self-employed. Many people believe that, since they don’t have a regular income or lack three years’ worth of accounts, they’ll be rejected for a mortgage. This is not entirely correct.

So let’s get the facts straight!

Most lenders will require you to provide at least two years of accounts, and a few may even ask for three years’. However, some lenders will accept applications from self-employed individuals with just a single year of accounts.

This means self-employed people can apply for a mortgage and receive an offer. Here’s what you need:

Which Documents Will I Need When I Make A Mortgage Application?

Mortgage lenders require certain documents to be supplied by anyone making a mortgage application, so it’s a good idea to gather this together before you start your application. However, if you’re self-employed, you’ll need to supply extra paperwork to support your application.

These documents will include some of the following:

– Photographic valid ID such as your driving licence and passport.
– A bank statement, utility bill or council tax bill to prove your address.
– Usually, two years of limited company accounts if you’re the director of a limited company. Those accounts must have been fully signed-off by a qualified Accountant.
– At least two years’ of SA302’s.
– At least two years’ HMRC tax year overview’s .
– 12 months’ of contracts if you’re a contractor, all of which must have been signed by all involved parties.
– Six months of payslips for Umbrella or CIS workers and contractors.
– Three months of bank statements for your business account, three months of bank statements for the account that your salary goes into and three months of bank statements demonstrating any rental payments you make.
– A bank statement proving you have sufficient funds for your deposit.
– If you work in a permanent job as well as working on a self-employed basis, you’ll need between three and six months’ of payslips. If you receive additional commission or bonuses, you may need to supply two years of P60s.


Can I get A Mortgage If I Only Have One Year Of Accounts?

A small number of lenders will accept applications from self-employed individuals with a single year of accounts, but if you can supply at least two full years’ worth, you’ll have a wider choice of deals and lenders to pick from.

In general, providing as many years’ of accounts as possible will give you the best possible chance of acceptance. If you’re able to show increasing or consistent profit over several years, this will also help your case.

Lenders will look at your average profit over an extended period to determine how risky you are to lend money to. If you have a dramatically varying income, you may have to show some evidence of your future income potential, such as evidence of new contracts or clients, or you may be able to demonstrate you have large amounts of savings.

 

How Can I Increase My Chance Of Being Offered A Mortgage?

Lenders consider several factors when deciding whether to approve a mortgage application.

If you’re self-employed, here are some steps you can take to improve your chance of acceptance:

– Check for errors on your credit record.
– Make sure you’ve registered to vote.
– Keep your accounts up to date.
– Hire an accountant to do your accounts for you.
– Avoid payday loans.
– Minimise the number of applications you make for credit in the run-up to your application.
– Don’t max out your credit card.
– Avoid making only the minimum payment on your credit card.
– Get a deposit in place early.
– Prepare your documents in advance.
– You should also take professional advice from a knowledgeable mortgage advisor to make sure that you’re in the best position to make a well-informed decision about which lenders to make your application to.

I deal with self-employed mortgages regularly here and would be happy to assist you on your home journey. Whether that’s with your mortgage or arranging insurance for you, then please do not hesitate to get in touch. You can book a call with me here or if you’d prefer, drop me a message and I will get back to you as soon as possible.

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