Mortgage with One Year’s Accounts

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Mortgage with One Year’s Accounts, Expert Mortgage Advice for CIS Subcontractors

Mortgage with One Year’s Accounts

David Sharpstone talks all about mortgages with one year’s accounts.

CIS Mortgage Advice is a trade name of Just Mortgages Direct Limited, which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited, which is authorised and regulated by the Financial Conduct Authority. 

Approved by The Openwork Partnership on 01/02/2023.

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

Yes, but the options are limited. I’m not going to pretend it’s easy, as most mortgage lenders will want two years. Sometimes we have to look at more niche lenders for the self-employed. 

It can be done with one year’s accounts but mortgage lenders are a bit pickier generally. They know a lot of business will fail within their first year – so having one year’s accounts is great but not the be-all and end-all. Any mortgage lender is going to want to see a bit more meat on the bones. They’ll be interested in business performance for the rest of the year – even if it’s only a third or halfway through. 

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

Whether you’re a limited company director or a sole trader, the same rule applies with one year’s accounts. First of all, they have to have been submitted and confirmed. There’s no point in turning up to your mortgage broker with a pile of bank statements trying to show what you’ve turned over. Your accounts must be complete and filed.

Limited company accounts have to be produced by an accountant, and sole trader accounts must be 100% complete and submitted to HMRC. The next thing that we need to look at for a sole trader is a form that used to be called an SA302 – it’s a document showing your tax calculations. It shows your accounts are 100% submitted and is usually a one or two page document that you can download from HMRC or through your accounting software. It shows the sole trader’s profit after expenses. 

For a limited company director we could either look at your salary and dividends on that self-assessment, or if you’re a company director with retained profits [as covered on our limited company mortgages podcast] you can show the company accounts. These have to be signed by your accountant. 

So it can be done. It does restrict the mortgage lenders quite a lot but if you’ve found the property of your dreams that ticks all the boxes you might want to take action before you have two full years’ accounts. 

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

This is probably the most popular question I’m asked by any new client. Every mortgage lender has their own affordability model. They will have what they call a Loan to Income Cap, which works on thresholds – so the more you earn, the higher that cap. It varies between 4.5 to 5.5 times your income, whether that’s your salary and dividends or net profit if you’re a sole trader. It could also be retained profit in the company plus salary. 

Just because those caps exist, you’re not necessarily going to reach the top level. The next thing the mortgage lender is going to build into their affordability model are your financial commitments. That could be something on your credit report like car finance, or whether you’re paying child maintenance or nursery fees. All these things will come into it to pump out a figure at the end.

Can I remortgage with one year’s accounts?

Yes, it’s largely the same thing whether you’re remortgaging or buying. We’d end up with the same limited set of lenders that consider one year’s accounts. They will almost certainly want to look at the latest performance. 

Let’s imagine a limited company director. They have nine months after the year end date to submit those accounts so we’re potentially looking at income earned a long time ago. Naturally any lender is going to want to look at more recent bank statements to check that there’s evidence of the same level of income stated in the accounts. It’s all about building up the narrative and evidence for the mortgage provider to lend you that money.

What if I have bad credit? Can I still get a mortgage with one year’s accounts?

In the current economic climate even people with good income are getting themselves into bad credit from circumstances beyond their control. I’m seeing more and more of this now. 

A mortgage is a bit like those Venn diagrams that we did at school, with the interlinking circles. We start off with roughly a hundred mortgage lenders out there, but each element of criteria puts them in a different circle within the diagram. Having one year’s accounts means the available lenders are already quite limited. Then we have to find lenders that overlap with the bad credit circle, which will narrow down the lenders more. 

The short answer is yes, we can, but It does get more tricky and will depend on your specific situation.

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Are there many lenders that accept one year’s accounts?

I’m not going to name the specific lenders as these do change, but I could probably count them on one hand. 

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

You essentially have two choices. You could try to do it yourself if you’re feeling confident to do a little research on the internet. You may be successful, I don’t know. But finding the right lender with one year’s accounts is about as tricky as it comes – and if you’re trying to link in with adverse credit, the lenders you need may only distribute their products through Mortgage Brokers. 

Even if you have all the confidence in the world you may not actually be able to access a lot of these lenders without a broker. With us, you stand a much higher chance of getting your mortgage successfully approved, because we’re experienced in doing this day in, day out.

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

CIS Mortgage Advice is a trade name of Just Mortgages Direct Limited, which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited, which is authorised and regulated by the Financial Conduct Authority.

Approved by The Openwork Partnership on 01/02/2023.

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