How to get a mortgage with only one year's tax return
Thursday 5th July 2018
Self-employment has risen from 3.3 million to 4.8 million since 2014, fuelled by a mix of the autonomy gained by working for yourself, the appeal of of a high earning potential, and side-gigs turning into full-time job. As a new business owner, you'll already be beaming with excitement, but that feeling can fade if you decide you'd like to buy your own home but realise that it's not as straightforward for entrepreneurs as it is for employees.
When purchasing a house, most lenders require two full accounting periods to pass and be reconciled before they are willing to lend to you. So depending on when you actually file your tax return, this could seriously affect your ability to obtain a mortgage for up to the first two or even three years after you have started your business.
So how does getting a mortgage work for the self-employed?
With the end of self-certification mortgages in 2014, over a third of new business owners say that it has become increasingly more difficult for them to become homeowners. This change means you must now apply for the same mortgage products and pass affordability checks as standard employees - but the process of approving the mortgage is hampered when it comes to providing evidence of your earnings. To facilitate the same mortgage to the self-employed, lenders will calculate the business' net profit after the deduction of expenses. This allows for a clear view of the funds spent on the start-up and growth of the business and potential sustainability.
Does this also mean that obtaining a mortgage will cost a business owner more?
Despite the extra evidence needed to secure a mortgage, it is not necessarily true that having a mortgage whilst being self-employed is more expensive. Providing that the financial information given to your lender is sustainable with the terms of the mortgage, the cost might not even differ from someone who is employed.
As a mortgage broker, we know how committed new business owners have to be to make it through the first year, and we love supporting new business owners in achieving their dream of home ownership. We've spent years building close connections with our lenders and therefore we know just the ones who can support you with buying your first house with just one year's accounts. We'd be more than happy to discuss your individual situation and we'll do whatever we can to make the process as easy and painless as possible.
With a suite of products and services that we are happy to discuss with you, we can build around helping your business owners to achieve home ownership. Using your SA302 Self-Assessment overview and other metrics to progress these applications, and we do everything we can to make the process easy and painless.
So, if you have been self-employed for one to two years but have been worrying about how you are going to get on the property ladder, please give Your Mortgage Broker Cardiff a call on 02921321300 to get booked in for your consultation.