Can you still get a mortgage after a bad year in business?

razzle7691

I am 52 any pretty late to the house buying game. I run my own business and had been granted a mortgage in principle based on my last two years accounts (up until April 2018). Both revealed profits of around £54,000 and I can borrow a multiple of 4.5 (times) on this.
If I fail to secure a property by this October (I think) I would then have to produce accounts for this year, basically to year end April 2019, as the period without enough recent financial history would be too extensive.
But I have had a fall in my profit to £35,000 for this most recent year. This would reduce my average profit of course, thus reducing the amount I could borrow, but I think a lender would feel that the drop in profit was too extensive, On this basis, if I don’t buy soon I’m guessing I won’t be able to get a mortgage. Any thoughts or advice on this would be gladly welcome. Thanks

[Deleted User]

99.9% of lenders will take the most recent year as the income if it had dropped. Wont average them out.

There are a few that will take a reason for the drop to see if it is likely to happen again (maternity / medical / one off etc etc). Can then ignore the drop and go on last figures. Will usually get accountant to confirm reasons and sustainability.

There are also lenders that go beyond 18 months for accounts and instead work on the actual hmrc deadline. So you can use your 2018 figures up to Jan 2020 in theory (if doing online)

[Deleted User]

As JMA says, I wouldn't be too concerned about not having 2019 figures at this stage, since legally you do have a while to sign them off.

Of course the later any (re-)application happens, the more likely it is that someone will query it.

Also keep in mind that current performance could also be used to support it being a one-off drop and you're now back to higher levels - e.g. business bank statements showing good turnover, possibly evidence of future work/contracts (depending on your industry of course).

Not all lenders would allow/support that, as above working from latest year is standard, but things can be tweaked for good quality cases. So I wouldn't lose hope completely, even if you end up 6 months down the line with no property. Projections could also be used to support your current year (19/20) being back up again, even though 18/19 was poor

amnblog

If you have an explanation that shows that the drop in profit is a one off event for a specific reason (e.g. £19,000 to refurbish your premises) you may have a reason for a Lender to work on the previous figures.

Otherwise the ‘evidence’ suggests you may not get the profit back to the original level.