Mortgage adviser for self employed buyers

Twelve months, or one full set of accounts, is the usual minimum. A number of lenders will consider applications at that point, though your choice narrows and rates may be less competitive than they would be with a longer record.

Two years opens up most of the mainstream market, and three years gives you the widest choice. Lenders are looking for evidence that your income is established rather than a short run of good fortune.

There is one useful exception. If you have moved into self employment doing broadly the same work you previously did as an employee, some lenders will take your earlier employment into account as continuity of experience. A contractor who left a salaried role to do similar work for the same sector is treated more generously than someone who has changed field entirely.

If you are close to a year of trading, it is worth a conversation before you start viewing properties.

It depends entirely on how your business is structured, and this is where the biggest differences in borrowing appear.

Sole traders are assessed on net profit before tax, usually averaged across the last two years. Where profit is rising, some lenders will use the most recent year alone, which can significantly increase what you can borrow.

Limited company directors are the most variable. Many lenders take salary plus dividends actually drawn. Others will use salary plus your share of the company’s net or retained profit, which matters a great deal if you leave money in the business rather than drawing it all out. That single difference in approach can change your borrowing by six figures.

Partners and LLP members are generally assessed on their share of profit, evidenced through tax calculations or a letter from the finance director.

Bringing your last two or three years of accounts to a first appointment lets us model these approaches side by side.

Most lenders work to a multiple of around four and a half times your assessed income, with some stretching to five or five and a half times in the right circumstances.

The multiple, though, is rarely the decisive factor. What matters far more is the assessed income figure that multiple is applied to, and as above, that can vary substantially between lenders looking at identical accounts.

Your committed outgoings are then deducted. Credit commitments, car finance, childcare and school fees all reduce affordability, and anything continuing beyond completion will be annualised and taken off before the multiple is applied.

Deposit size also affects the outcome. Five to ten per cent is a realistic starting point, but the range of lenders available to you widens and pricing improves at twenty five per cent, with the most competitive rates generally reserved for deposits above forty per cent.

Yes, in most cases. One full year of accounts submitted to HMRC is enough for several lenders, and this is a fairly common situation among the clients we see.

What matters more than the length of trading is the strength of everything around it. Lenders considering a single year will look closely at your business bank statements to confirm current trading is consistent with the accounts, at your credit file, and at the size of your deposit.

A larger deposit is particularly helpful here, as it reduces the lender’s exposure and offsets the shorter track record.

Evidence of forward work also helps. Signed contracts, a healthy pipeline or regular clients all support the case that the income will continue.

We would rather tell you honestly whether now is the right moment or whether waiting for a second set of accounts would put you in a materially stronger position.

Getting the paperwork in order early prevents most delays, so it is worth gathering the following before your first appointment.

For sole traders and partners, you will need SA302 tax calculations and matching tax year overviews for the last two or three years, both downloadable from your HMRC online account.

For limited company directors, you will need full company accounts prepared or signed off by a qualified accountant, along with your personal tax documents.

Everyone will need three months of personal bank statements, three months of business bank statements in most cases, proof of identity and address, and evidence of your deposit and where it came from.

If your accountant holds much of this, we are happy to liaise with them directly. Where there is something in the file that needs explaining, such as a weaker year or a one off cost, tell us at the outset so we can address it in the application rather than react to a query later.

Because you deal with one person who understands accounts and stays with your case from the first conversation to completion.

Larger firms move you between departments, and self employed cases suffer most from that, since the person submitting the application is rarely the person who understood why your profit dipped in a particular year. Here, the adviser who reads your accounts is the adviser who presents them.

We are based in Clayhall and work throughout Essex and east London, so appointments can be arranged in person, by phone or by video, including outside normal working hours when running your own business makes weekday meetings difficult.

We will also be straight with you about timing. If waiting three months for your next accounts would improve your position, we will say so rather than push through a weaker application now.