For many self-employed borrowers, getting a mortgage can feel overly complicated. A common concern is that lenders won't consider an application without several years of accounts, or that profits left within a limited company won't count towards affordability.
In reality, neither is necessarily true.
One of the biggest misconceptions surrounding self-employed mortgages is that you need two or three years of finalised accounts. While a longer track record can provide access to a wider range of lenders, some are willing to consider applicants with just one year's accounts, particularly where there is evidence of strong income and relevant industry experience.
Rather than focusing solely on how long a business has been trading, some lenders will look at the bigger picture.
For limited company directors, affordability can present different challenges. Many business owners choose to keep profits within their company to support future growth or maintain healthy cash reserves, rather than withdrawing everything as salary or dividends.
While this can be a sensible business strategy, it can sometimes mean personal income appears lower than the company's actual profitability. As a result, borrowing capacity may look restricted if a lender only assesses income taken from the business.
However, some lenders are prepared to take the retained profits into account when considering affordability. This means they may look beyond the salary and dividends drawn to gain a broader understanding of the company's financial performance.
The difference in approach can be significant. Two lenders reviewing the same application may arrive at very different outcomes depending on how they assess self-employed income and limited company profits.
This is why self-employed mortgages are rarely a straightforward box-ticking exercise. The lender that offers the best solution for one borrower may be entirely different from the lender best suited to another, even if their circumstances appear similar.
The good news is that having only one year's accounts, or retaining profits within your company, does not automatically mean your options are limited. The key is understanding which lenders are most likely to consider your circumstances.
That's where speaking to an experienced mortgage broker can make a real difference. A broker can identify lenders whose criteria are aligned to your situation, help present your income in the most effective way and ensure that your application reflects the full strength of your financial position. With the right advice, obstacles that may initially seem challenging are often much more manageable than borrowers expect.
