Securing a mortgage can be challenging for self-employed individuals, especially those with only one year of trading history. While many lenders favour applicants with at least two to three years of accounts, there’s hope for those just starting their self-employment journey.
By presenting a strong overall financial profile and working with the right lenders, you can make homeownership a reality, even with limited trading history. This guide will show you how to navigate the process and increase your chances of success.
Is It Possible to Get a Mortgage with 1 Year of Self-Employment?
Yes, you can obtain a mortgage with just one year of self-employment history. Specialist lenders understand that self-employed individuals often experience non-traditional income patterns, especially in their early years.
While high street banks may be more rigid in their requirements, many lenders are willing to consider applicants with shorter trading histories if other aspects of their profile—such as income, credit score, or deposit—are strong.
Key Factors Lenders Consider for 1-Year Trading History
- Previous Employment: If you transitioned from a similar salaried role, lenders may view this as evidence of stability and expertise in your field.
- Proof of Income: Lenders need clear documentation of your earnings over the past year.
- Credit Score: A strong credit score can help mitigate concerns about your limited trading history.
- Deposit Size: A larger deposit reduces the lender’s risk and can increase your chances of approval.
What Documents Do You Need?
For self-employed applicants with just one year of trading history, thorough documentation is key. Lenders typically require:
- SA302 and Tax Overview: Documents from HMRC that confirm your declared income.
- Accountant-Certified Financials: A profit and loss statement signed by a certified accountant adds credibility to your application.
- Bank Statements: Usually covering 6–12 months, these should show consistent income deposits.
- Previous Employment Details: If applicable, include payslips or P60s from your last salaried role to demonstrate income continuity.
Tips to Improve Your Application
1. Work with a Specialist Mortgage Broker
Navigating the mortgage market as a self-employed individual can be complex. A specialist broker can connect you with lenders who are open to applicants with only one year of trading history. They understand lender criteria and can tailor your application to highlight your strengths.
Why It Helps: Brokers streamline the process, save time, and improve your chances of securing a mortgage.
2. Strengthen Your Credit Profile
A strong credit score is crucial for self-employed applicants with limited trading history. It reassures lenders of your financial reliability.
- Pay all bills on time.
- Reduce credit card balances to below 30% of your limit.
- Avoid new credit applications in the months leading up to your mortgage application.
3. Provide Evidence of Financial Stability
Demonstrating consistent and growing income can help offset concerns about your short trading history. Include:
- Bank statements with regular income deposits.
- Proof of ongoing contracts or client relationships.
- Evidence of retained earnings or savings to show financial resilience.
4. Save for a Deposit
While some lenders accept a 5–10% deposit, offering a larger deposit (15–20%) reduces the lender’s risk and strengthens your application.
Case Studies
Case Study 1: Marketing Consultant with 1 Year of Trading
Anna transitioned from a salaried marketing role to self-employment. After one year of trading, she earned £45,000, supported by SA302s and consistent bank statement deposits. Working with a specialist broker, she secured a £250,000 mortgage with a 10% deposit from a lender willing to assess her industry experience and income potential.
Case Study 2: Tradesperson with Growing Income
John, a self-employed plumber, presented accounts showing £55,000 in earnings for his first year. He provided a letter confirming ongoing contracts and saved a 15% deposit. With the help of a broker, he secured a £300,000 mortgage at a competitive interest rate.
Common Challenges and How to Overcome Them
1: Limited Trading History
Problem: Most lenders prefer at least two years of accounts.
Solution: Highlight your industry experience, provide evidence of consistent income, and work with a broker who can connect you to flexible lenders.
2: Variable Income
Problem: Fluctuations in income can raise red flags.
Solution: Demonstrate a clear upward trend in earnings and include a forecast from your accountant to show expected growth.
3: Low Credit Score
Problem: A poor credit score can limit your lender options.
Solution: Take proactive steps to improve your credit by paying off small debts, making timely payments, and reducing credit utilisation.
In Closing
Getting a mortgage with just one year of trading history as a self-employed individual is challenging but achievable. By carefully preparing your documentation, strengthening your financial profile, and working with a specialist broker, you can overcome obstacles and secure the mortgage you need.
Remember, lenders assess the full picture, so showcasing your financial stability, growing income, and industry expertise can make all the difference. With persistence and the right guidance, your goal of homeownership is well within reach.
Frequently Asked Questions
Q 1: Do all lenders accept 1 year of trading history?
Ans: No, but some specialist lenders and high street banks (e.g., Halifax) are open to applicants with strong financial profiles and relevant industry experience.
Q 2: Can I apply if my income is variable?
Ans: Yes, lenders will average your income over the past year to assess affordability. Consistent income deposits strengthen your application.
Q 3: How much deposit do I need with 1 year of trading history?
Ans: While 10% is usually sufficient, a larger deposit (15–20%) can increase your chances of approval.
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.
