Self-Employed Mortgage 2 Years’ Accounts

Will I be assessed on net profit, gross income or dividends?

Yes, there are lenders that look at all of those. Lots of lenders look at dividends – that’s the go-to approach. A few lenders will look at your net profit after tax – I’m thinking more about limited company directors and business net profit.

A couple of lenders will look at your limited company gross profit, which seems a bit bizarre to me, but they’ll look at it. There’s a lender for all of these scenarios. We just need to decide which to go to. We do this all day, every day, so we know where to start.

It can be a minefield because there are many different ways of looking at your income if you’re self-employed or a company director.

Do I need an accountant to prepare or certify my accounts?

It depends. If you’re a sole trader, not necessarily, and you can do your own tax return. We won’t want a copy of your full tax return – just your tax calculations or SA302s, along with your tax overviews, which show that your tax account is up to date.

If you’re a limited company, it is generally expected that an accountant will prepare your accounts – although I’ve actually done a mortgage this week for someone that doesn’t have an accountant. They only pay themselves a salary, which is very unusual nowadays, so they were an exception to the rule.

But generally a limited company would need an accountant – if we’re looking to use your profit, not your dividends, the lender is going to want accounts produced by a qualified accountant.

What documents do I need to apply for a mortgage with two years of self-employed accounts? Are personal and business bank statements required?

Some lenders will want business bank statements. We always need personal bank statements for at least three months, sometimes more.

Business bank statements are always useful because they show that the business is actively trading, but not all lenders will ask for them.

The documents involved depend on how you’re set up. For a sole trader, we want your tax calculations, SA302s and tax overviews. For a company director, we’re probably going to want those same things and also perhaps your accounts.

Some lenders like an accountant’s certificate, which is a reference you send to your accountant. They fill it in, sign it and send it back. Then we will want ID and proof of deposit as usual.

How much deposit do I need if I only have two years of accounts?

Regardless of how many years of accounts you’ve got, a 5% deposit is generally doable. 5% is generally the minimum, but 10% is better. The more deposit you’ve got, the easier everything gets.

Can I still get a high Loan to Value mortgage or LTV?

Yes, as long as you’ve got a 5% deposit, although it does depend on your credit score, your income and the internal scoring of the lender.

They’ll make their own decision – it’s not all about your score on an Experian report, as the lender will make a decision regardless of that. But there are no restrictions on this just because you’re self-employed.

Will my credit score impact my eligibility more because I’m self-employed?

No, not particularly. If you’re self-employed, some lenders might need you to score slightly higher on their internal scoring system – which is a complete mystery to anyone outside. They don’t publish these things, so no one really knows how they work.

But generally it’s no different just because you’re self-employed. Credit score and credit history affects everyone’s ability to get a mortgage – the better your credit, the more likely you are to be accepted. That’s nothing new, and it’s not affected just because you’re self-employed.

Is it better to go through a mortgage broker if I’m self-employed?

The key is knowing where to start and which lenders to go to. A mortgage broker will know that. We do these cases all the time, so we know which lenders to go to and which ones not to bother with.

You can’t just Google this sort of information, unfortunately. It’ll take you hours on forums and things, and you still won’t be getting personalised advice. So talk to us – we’ll know with each case where best to start.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

For specialist tax advice, please refer to an accountant or tax specialist.

The information contained within this article was correct at the time of publication but is subject to change.