Securing a mortgage with only one year of trading history can be challenging, as most lenders prefer a minimum of two to three years of accounts. However, it is possible, especially with specialist lenders and the guidance of a broker like Mortgage Knight.
This guide explores how lenders assess applicants with limited trading history and how Mortgage Knight can help you present a strong case.
Common Lender Requirements for Self-Employed Mortgage Applicants
For self-employed individuals, most traditional lenders require at least two to three years of trading history to assess income stability. However, some specialist lenders offer mortgages for individuals with one year of accounts, evaluating each case on its merits.
Factors Lenders Consider with One Year of Trading History
If you have only one year of trading history, lenders take a closer look at several factors to determine your ability to repay the mortgage:
Profitability in First Year Lenders will closely examine the profitability of your first year. If your accounts show a solid profit, it demonstrates financial stability and potential for growth.
Type of Business and Industry Stability Certain industries, such as healthcare, IT, and law, are perceived as more stable, making lenders more willing to work with professionals in these fields.
Other Sources of Income If you have additional income sources, such as rental income or a spouse with a stable income, it can strengthen your application and help meet affordability criteria.
Deposit Size and Loan-to-Value (LTV) Ratio Lenders may require a higher deposit (lower LTV) for applicants with limited trading history to reduce their risk. A larger deposit demonstrates financial commitment and may improve approval chances.
Credit History and Financial Background A clean credit history and strong financial background beyond the limited trading history can add credibility to your application.
How Mortgage Knight Can Help You Secure a Mortgage with One Year of Trading History
Mortgage Knight specialises in assisting self-employed individuals with limited trading history. We connect clients with specialist lenders who understand the challenges of newly self-employed applicants and offer solutions to secure a mortgage. Here’s how we help:
Connecting You with Specialist Lenders
- Finding Lenders Open to Limited Trading History: Mortgage Knight has relationships with lenders who are more flexible about self-employed applicants. These lenders understand that income can vary in early years and assess applications based on overall potential.
- Highlighting Business and Industry Stability: We work with lenders who consider the nature of your business, recognising stable and high-demand industries, making them more open to applicants with a shorter trading history.
Presenting a Strong Application with Detailed Financials
- Emphasising Profitability and Future Projections: Mortgage Knight helps you showcase your first-year profitability and, if possible, future earnings projections to demonstrate growth potential.
- Organising Additional Income Evidence: If you have other income sources, we ensure these are clearly documented and included in your application. This can strengthen your profile and demonstrate affordability.
Advising on Deposit Size and Loan-to-Value Ratio
- Considering a Higher Deposit for Improved Approval Odds: Some lenders may require a larger deposit if you have limited trading history. Mortgage Knight advises on deposit requirements and helps you structure your application with the best LTV ratio to reduce lender risk.
- Structuring Your Application to Meet Lender Criteria: We tailor your application to fit lender requirements, presenting a balanced profile that reflects your financial commitment and business stability.
Case Study: Mortgage Success for a Newly Self-Employed Client with One Year of Trading History
Tom, a 32-year-old graphic designer, became self-employed one year ago after a successful career in a design firm. Despite his limited trading history, he demonstrated strong profitability in his first year. Tom approached Mortgage Knight to help him secure a mortgage, hoping to buy his first home with a 15% deposit. Here’s how we guided Tom through the process and helped him achieve his goal.
Client Background
Tom had been self-employed for one year and had established a profitable graphic design business. With a stable client base, he demonstrated the potential for growth but lacked the two years of accounts most lenders require.
Challenges Faced
Limited Trading History: With only one year of accounts, Tom’s application was viewed as higher risk by mainstream lenders.
Higher Deposit Requirements: Some lenders required a larger deposit, which initially limited Tom’s options for a competitive rate.
Solutions and Outcome
Connecting with a Specialist Lender: Mortgage Knight identified a specialist lender experienced in working with self-employed clients with limited trading history. The lender was willing to assess Tom’s profitability and potential rather than just focusing on trading length.
Emphasising Business Profitability and Client Stability: We highlighted Tom’s strong profitability and stable client base, showcasing his business’s success and growth potential, which increased lender confidence.
Outcome
With Mortgage Knight’s assistance, Tom secured a mortgage with a competitive interest rate. He was able to purchase his first home with his 15% deposit, thanks to a specialist lender willing to consider his short but successful trading history.
Key Takeaways for Self-Employed Applicants with Limited Trading History
Work with Specialist Lenders for Flexibility
Specialist lenders often understand the nuances of self-employment and may accept applications with only one year of trading history.
Highlight Profitability and Industry Stability
Emphasising your business’s success and industry stability can help make up for limited accounts.
Consider a Larger Deposit
A higher deposit can reduce risk for lenders, making them more willing to offer a mortgage with limited trading history.
Demonstrate Additional Income Sources
If you have other income streams, showcasing these can strengthen your application and increase affordability.
Why Choose Mortgage Knight for Your Self-Employed Mortgage Needs?
Mortgage Knight has extensive experience helping self-employed clients, including those with limited trading history, secure mortgages. We connect you with specialist lenders who understand the challenges of self-employment and offer tailored guidance to strengthen your application. Contact us today to explore your options and take the first step toward homeownership.
Frequently Asked Questions
Q: Can I get a mortgage with only one year of self-employed income?
A: Yes, some specialist lenders accept applications with only one year of trading history, especially if you have a profitable first year and additional income sources. Mortgage Knight can help identify these lenders.
Q: Will a higher deposit improve my chances of approval with one year of trading?
A: Yes, a larger deposit reduces the loan-to-value (LTV) ratio, which lowers lender risk and can improve approval odds. Mortgage Knight can advise on optimal deposit amounts.
Q: Do lenders look at future projections if I only have one year of accounts?
A: Some specialist lenders are open to considering projected earnings, especially if your business shows growth potential. Mortgage Knight can help structure your application to include projections where applicable.
Q: How does my industry impact my mortgage application with limited trading history?
A: Certain industries, like healthcare, technology, and professional services, are considered stable, and lenders may be more willing to work with applicants from these sectors despite limited accounts.
Professional Contractor Mortgage Guidance
If you’re a contractor looking for professional mortgage guidance, we’re here to help. Our specialist knowledge and lender relationships enable us to provide expert advice tailored to your situation.
Schedule your consultation today. We’ll discuss your circumstances, explain your options, and provide honest advice about the best approach for your contractor mortgage application.
