Mortgages with two years’ accounts

Getting a mortgage with only two years’ of accounts can be difficult because lenders want as much proof of your income as possible. Lenders like to see three year’s worth of tax returns so they can decide if you’ll be able to pay back the money you borrow from them. 

It’ll be helpful if you’ve got two years’  worth of tax returns, but if you don’t, there are other ways you can show a year-to-date income. A qualified accountant can help you do that.

Once you’ve been self-employed for three years and have three year’s worth of accounts to prove it, most lenders will be happy to offer you a mortgage if your accounts are healthy and your income is stable. But two years of accounts is usually enough for lenders to see what kind of income you’re bringing in from your business. Your best chance of being accepted is applying to a specialist lender. Specialist lenders don’t usually deal directly with the public - you’ll have to work with a mortgage broker to find one and put together a good application. Our Mortgage Experts can do just that. Make an enquiry to find out your options.

Unfortunately, most high street lenders will need to see three year’s worth of accounts before granting you a mortgage.  A lot of people get rejected by mainstream lenders on the grounds that they don’t have enough trading history. It’s important not to give up, because there are specialist lenders out there who’ll consider you with two years’ accounts. 

The longer you’ve been trading, the more options you’ll have. But working with a specialist broker who’ll know the specialist lenders to approach will mean you don’t waste any time approaching the lenders who’ll flat out refuse you.

Many lenders will want to see three years’ worth of accounts from you to prove your income, or at least they’ll ask for your first year’s tax return at least. They do this because they want to work out how much you can afford to borrow based on your current income.

Generally, the more accounts you have, the better. If you have two years’ worth of accounts, It’s a great idea to have your accounts prepared by a qualified accountant. If they can do a year-to-date overview of your income, that’ll help your case when your mortgage broker approaches lenders. So while your chances do improve with the more accounts you have, you can get a mortgage even if you’ve been self-employed for as little as nine months.

Once you’ve found a lender that’ll consider you for a mortgage with two year’s accounts, you’ll usually have to provide two things:

1. Finalised accounts from a qualified accountant to prove your income

2. A self-assessment tax return (SA302)

Read more in our Guide: What Mortgage Lenders Look for in Mortgage Applicants.

Lenders generally don’t mind what sector you’re in, as long as you can prove your income is stable and your business is viable.

The amount you need to earn to afford a mortgage completely depends on things like:

• The price of the property you want to buy

• What kind of employment you’re in

• Whether you have any credit issues

If you’re self-employed and are registered as a sole trader or you’re a freelancer, a lender will analyse your earnings by looking at the net profit of your business over recent years. 

If you’re set up as a limited company, a lender will look at your salary and dividends or share of net profit. If you’re a contractor, then your annualised day rate will be taken into consideration.

This will depend on your income and your credit history – just like how it’d be if you were full time employed. It’ll also depend on what kind of self-employment you’re in. 

For example, if you’re a sole trader or in a partnership, the amount you can borrow will be based on your share of the net profit from your two year’s accounts. But if you’re a director of a company, the amount you can borrow is usually calculated on the salary you take, or the dividends.

There are lots of other things lenders will look at when they’re deciding whether to offer you a mortgage. Lenders will look at:

• Your credit report: If you have any credit issues on your file that will affect the rates you can get and the amount you can borrow. 

• Your deposit: the larger a deposit you have, the more you’ll be able to borrow. 

• The property type: A property that has any issues might need a specialist lender, which limits your options a bit more.