Starting your own business is exciting. But if you also want to buy a home, you may hear that lenders like to see two years of accounts. That can feel like a long wait, especially if your income is already strong. The good news is that a shorter trading history doesn't always rule you out. This guide explains how lenders think, what can help your case and what options exist, so you can plan your next move.
Why Lenders Like Two Years of Accounts
When you're employed, a payslip shows a steady income. When you're self employed, income can go up and down. So lenders look at your past tax returns and financial statements to see what you really earn. That's why home loans for self employed people often come with a request for two years of records.
Two years gives a lender a clearer picture of how your business performs over time, including the slow months and the busy ones. It isn't a law. It's lender policy, and policies differ from one lender to the next.
What if You Have Less Than Two Years?
Some lenders will look at borrowers with a shorter history on a case-by-case basis. They tend to look at the bigger picture. Things that can help include:
Work in the same industry before
If you moved from employee to contractor in the same line of work, that history can count in your favour.Steady or growing income
Regular invoices, signed contracts or repeat clients show your income isn't a one-off.A bigger deposit
More deposit means less risk for the lender.Savings and cash reserves
These show you can handle quiet months.Clean credit and low debt
Lenders like to see you manage credit well.A second income
If you have a partner on a regular wage, lenders can usually count that income too.
No lender can promise an outcome. But knowing what they look for lets you put your case forward clearly.
Evidence That Helps Your Application
- Tax returns and financial statements for the period you have been trading
- Recent business and personal bank statements
- GST returns, if you're registered
- Contracts, invoices or an order book that shows upcoming work
- A letter from your accountant confirming your income and trading history
- Payslips or employment records from before you started the business
- Proof of your deposit
Options to Consider
A Lender With a Flexible Policy
Some main lenders assess newer self employed borrowers case by case, especially with a larger deposit and a strong industry background. Policies change, so your adviser checks which lenders are open to this at the time.
A Non-Bank Lender
Non-bank lenders can sometimes assess income differently. Rates and fees may be higher, so it's often a short-term step, with a plan to move to a main lender once you have a longer history. Ask about exit costs before you agree.
Waiting and Preparing
If the numbers don't work yet, a few months of preparation can make a big difference. Your adviser can tell you what lenders want to see and roughly when you might be ready.
Adding a Borrower or Guarantor
A partner or family member can sometimes support an application. Guarantees carry real risk for the person giving them, so they should get their own legal advice first.
How a Self-Employed Mortgage Broker Helps
Every lender treats self employed finance a little differently. A self employed mortgage broker works with a panel of lenders and knows which ones are more open to newer business owners. They can also help you present your income clearly, so the lender sees the full picture.
For more on how lenders work out your income, see this guide to self employed mortgage loans and how banks calculate income.
Simple Steps to Strengthen Your Position
- Keep tidy records, and file your tax returns and GST on time
- Keep business and personal accounts separate
- Avoid new debt, such as car finance, before you apply
- Build your deposit and a cash buffer
- Talk to an adviser early. Getting advice on home loans for self employed people before your second year can help you plan
Growing a Business and Planning a Home?
The two can happen together with a good plan. The licensed mortgage advisers at Capital Finance can look at your situation, compare options from our panel of 20+ lenders and guide you through to settlement. Capital Finance is paid commission by lenders. Get in touch to talk through where you stand.
FAQ
Can I get a home loan with only one year of accounts?
Some lenders will consider it case by case, often with a larger deposit and a strong industry background. There are no guarantees, and each lender decides for itself.
Will my income be assessed on profit or turnover?
Lenders usually look at your net profit, not just your turnover. Your accountant's figures matter here.
Does my business structure matter?
Yes. Sole traders, company directors and contractors are often assessed differently. Your accountant and adviser can explain how it applies to you.
Does paying less tax affect my borrowing?
It can. Lower taxable income can mean a lender counts less income. Talk to your accountant and adviser before you apply.
Do I pay a mortgage adviser?
In many cases, the lender pays the adviser a commission. Some situations may involve a fee, and a licensed adviser should explain any cost up front.
