There are many reasons why you might want a mortgage just one year into self-employment. Perhaps you've spotted your dream property and don't want to pass it up. Maybe you've had a successful year and it feels like the right time to buy. Perhaps you simply need to move and buying is the best option. Whatever the reason, getting a mortgage when you're self-employed can be that bit more challenging, doubly so when you've been trading for less than two years.
So what do you need to know, and what can you do to give yourself the best chance? Read on for everything you need to know about getting a mortgage with less than two years' trading.
What's the difference between an employed and self-employed mortgage?
The answer is simple: it all comes down to your finances. When you're employed, your lender has the safety net of a company paying you the same salary every month, a stable, regular and guaranteed source of income. That's exactly what lenders like to see when working out how much you can afford to borrow. By contrast, self-employed people often don't have that safety net, which makes them a higher risk to lenders.
If you're self-employed, that doesn't mean you should fear rejection from the off. It simply means there are a few more hoops to jump through. Lenders want the same information regardless of whether you're employed or self-employed: how much you make, and how much you can afford. That information is then used to calculate the figures that tell them whether they can lend to you.
The complication for people without years of self-employed history, or without invoices and income reports to back it up, is providing enough evidence. That's where a broker comes in. As specialists, we help self-employed clients access the mortgage they want without the rejection that going it alone can sometimes lead to.
Getting a mortgage when you've been self-employed for one year
If you're one year into self-employment and enjoying a good flow of income and overall success, getting rejected for a mortgage can be jarring. You might be bringing in more cash than you ever did as an employee, but because you don't yet have two years' worth of tax calculations, signed accounts or overviews, many lenders' systems give you an automatic 'no'.
That's where we come in. With over 30 years of helping clients with mortgages, we have access to a wide range of UK lenders. Many of our clients are self-employed, and we're experienced at finding solutions that work. Generally, with a year's worth of accounts, income reporting and projected profits, we can support you in finding a mortgage that meets your needs and matches your current income, no ifs, buts or confusing jargon.
What about remortgaging now I'm self-employed?
If you're currently self-employed but were fully employed when you took out your first mortgage, you'll need to undergo all the affordability and credit checks required to be eligible for remortgaging, whether you stay with the same lender or move to a new one. We can support you through the underwriting and remortgage process to make sure your new deal is as suited to your circumstances as possible.
Can I get a mortgage if I'm self-employed and have bad credit?
If you've been self-employed for at least a year and you currently have credit issues, there's still a possibility you'll be able to get a mortgage. But because of the increased risk, lenders will likely ask for more from you, typically a higher deposit, and potentially higher interest. Depending on the severity of any issues, a mortgage may not be available right now, but that doesn't mean it won't be in the future.
If you have a full record of your first year of income and accounts and your credit issues aren't too severe, we can help you find a lender that suits your needs. We work with you to figure out what's affordable and reasonable, then advise on the best path forward.
Do you need a professional mortgage broker when you're self-employed?
If you're considering using a broker for your mortgage as a self-employed individual, we'd love to help. Our team are experts in supporting self-employed clients, from those new to the world of self-employment to those who want a little extra guidance. With access to a wide range of UK lenders, we can find the self-employed mortgage that's right for you.
Get in touch to find out more.
Your home may be repossessed if you do not keep up repayments on a mortgage. You may have to pay an early repayment charge to your current lender if you remortgage.