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When you start your new business, you probably won’t have any accounts or books that show your true income. 

If you’re yet to complete a tax return for your first year of trading, then it’s unlikely that a lender will accept your mortgage application. 

As a result, trade has grown in numerous industries and self-employed business owners are seeing incomes increase to new levels.  


Acknowledging this, lenders are now beginning to look at income and affordability in a more flexible manner, especially when it comes to lending to those who want to borrow more than their previous year’s books will permit.  
 
And there are even some specialist lenders that will lend based on your latest year’s income.  

Borrowing based on your latest year’s income… 

Potential borrowers that are self-employed often struggle to obtain a mortgage for the amount they need, despite their income increasing.  
 
Regardless of whether your earnings have increased, you will still probably need to use a specialist lender when applying for your mortgage, which is why it’s important that you use a broker that has access to a wide range of lenders.  
 
Most mortgages are assessed on whatever income is deemed as sustainable, and this is usually established by looking at the history of the income and working out an average figure, usually calculated from the last two or three years. 

If you want a mortgage having had a large increase in income, then you can be limited by your previous year’s accounts with the majority of lenders. 
 
However, there are still some who can consider lending based on your new level of earnings in the right circumstances. 

Lenders have to prove that they have lent responsibly and base their application decisions on an applicant’s proof of affordability. Without your first year’s tax return, they don’t have this ability which means they won’t lend to you – even if your first six months was a huge success.  

What’s the most I can borrow if I’ve only got one year’s accounts? 

It’s usually around the same as an employed applicant, so between 4-5x your income, dependent on the lender and your credit score.  

For example, if you earn £30,000 a year, you could expect to borrow £120,000 - £150,000, depending on the lender. 

For more advice about getting a mortgage when you are self employed, come and visit our page here.

For advice on getting a mortgage if you’ve only got one year’s set of accounts, speak to one of our expert advisers who will be able to help you with the next steps.