Whatever your reason for wanting to buy a property, it is common for potential buyers to rush into things.
But mortgage lenders will ask that you have a certain number of accounts.
So, how many years accounts do you need to secure a mortgage in the UK? And why is this system in place?
Read on to find out.
How many years accounts do you need for a mortgage?
Most UK mortgage lenders in the UK ask for three years’ accounts before they will accept a mortgage application.
They also ask that these accounts be certified by an accountant.
This also applies to mortgages on land.
What is a specialist mortgage lender?
There are instances of specialist lenders accepting one or two years’ accounts to grant a mortgage.
They are relatively rare to find, and their terms are usually not as favourable as you would get from a high street lender after 3 years.
In this case, the lender will ask for much more information and enquire about details such as:
- Projects
- Assets
- Information about your employment before you started the business.
For example, this will be considered if you have worked in the same industry before starting your own business.
Furthermore, if you are able to put down a significant deposit on the property, the lender will look upon you more favourably.
Why do most mortgage lenders ask for 3 years accounts?
Asking for three years’ accounts is a mortgage lender’s way of protecting themselves.
In other words, they want to ensure that you are a reliable recipient of their loan and can be trusted to repay it.
It is common for new businesses to fail within the first three years of trading.
The same logic is behind their decision to check your credit. Bad credit reduces the chance you’ll get a mortgage.
Should I wait for three years’ accounts before applying for a mortgage?
It is no coincidence that most mortgage lenders demand three years’ accounts, which usually means you are in a relatively secure financial position.
Therefore, it is recommended that you do not rush into purchasing a property and ensure you have a higher deposit and monthly wage first.
If you are in no rush to purchase a property, waiting for three years’ accounts will typically get you more favourable terms on the mortgage.
(For example, your interest rate won’t be as high as it would’ve been after two years).
It is generally considered a good idea not to rush into a big financial commitment, such as a house.
If you are unsure whether now is the right time to buy a property, you should always seek independent advice from a property expert.
