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Mortgages for freelancers

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

Fact Checked By:
David Nicholson - Finance Editor

Mortgage For Freelancers

You are in the right place if you are looking for mortgage advice for a self-employed mortgage or a freelancer mortgage, so continue reading or click the link below to speak with our mortgage brokers as we help self-employed income applicants to get the best mortgage deal daily.

No matter your employment status or credit history, we can help introduce you to mortgage providers with specialist lenders who offer self-employed mortgages and mortgage deals.

Use our online mortgage calculator as a guide for your monthly repayments now

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The UK’s freelance and self-employed sectors have grown steadily over the past decade and is currently 14.8%. This is because many people have decided to work for themselves after being laid off in the recession or to enjoy the potential financial rewards and better work and life balance of working more flexible hours.

Lenders will need to be more flexible and change their policies to accommodate those with incomes other than basic, and fortunately, there are many great options for freelancers looking for a mortgage in the UK.

How to get a mortgage as a freelancer

You can get a mortgage as an independent contractor. A few criteria will determine if you qualify for a mortgage.

You’ll find that there are no comparison tables for freelancer mortgages. Also, generic rate tables don’t work for borrowers with specific needs. They don’t give you information about which lenders can cater to your income. High street lenders may not be able to offer you the same deals as a specialist lender.

As a mortgage broker, we can connect you with a specialist lender for contractors and freelancers. We can access the entire market and understand contracts and lending policies to match you with the best lender.

For mortgage advice from a mortgage broker, click the link below.

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Why is it so difficult for freelancers to get mortgage approval?

If your goal is to get a mortgage, you have many options. Although many lenders have tightened lending criteria, this has made it harder for contractors and freelancers to apply for mortgages. However, this has opened up new markets for specialist lenders that offer competitive deals.

Unfortunately, many lenders refuse mortgages to freelance workers or contractors who don’t have an excellent 3-year income history and a large deposit. Most brokers also don’t fully understand the contract and lender policies. Why?

First, most aren’t specialist mortgage brokers. This means they won’t be able to help if they don’t know the industry. If you are a freelancer looking for a mortgage, we recommend you speak to one of our advisors for free mortgage advice. They are experts and will do all they can to help get you a positive result.

Are you employed or self-employed?

The problem is that contractors and freelancers tend to be in the grey area between self-employed and employed. This means they might not meet the criteria of many lenders. They may have three years of self-employed accounts, which can be a problem for freelancers or permanent employment with an agreement.

Lenders like stability

Lenders want a stable, predictable, regular income to evaluate their loans to ensure they will get the monthly payments for the loan. They are less likely to be able to provide a steady income if someone is constantly moving from one job to another.

Working on multiple jobs or a more extensive project can make you self-employed. It all comes down to who pays tax and NI. If you are paid gross by the client, then you are self-employed. If they pay you net and you send HMRC your tax at source, you will be considered employed by most lenders.

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High street lenders aren’t independent mortgage experts.

High street lenders may have never encountered a freelancer or contractor. As such, they don’t know how lenders view applications, what they need to collect, what information they should gather, and what they will and won’t accept. Many creditworthy borrowers are therefore turned down (and turn to the internet to locate us!).

Brokers must keep up with the thousands of lenders’ requirements on various subjects. This is why you need to talk to a specialist who can handle your specific type of mortgage.

Click the link below to begin your mortgage journey with our mortgage brokers.

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What is the minimum time you must be a freelancer before you can apply for a mortgage?

Lenders will consider how long you have been doing it on your own when considering whether or not you are eligible for a mortgage. Lenders prefer three years of accounts, but some will accept less than six months. As freelancers become more reliable and sustainable, it becomes less problematic to have a variable income. You may be denied if you apply for a mortgage with the wrong lender, if you’re new to freelancing, or if you have recently switched from being employed to self-employed.

Can you get a mortgage if you are a freelancer working for yourself?

Lenders will typically ask for proof of income for self-employed individuals in the UK. However, some lenders require three years of accounts. Others may request two years. A few are willing to accept just one-year accounts. Some lenders can make exceptions and even allow someone to trade for only 9-10 months if they have the right circumstances.

These rules apply whether you are a sole trader, a limited company, or part of a partnership. Freelancers are less likely to be considered partners. These can be chartered or certified accountants who prepare accounts or tax returns showing the income and tax paid.

This proof can be provided by the SA302 or a ‘tax-year overview’. HMRC no longer offers a paper SA302 form. However, many lenders will accept a digital version.

If you are a freelancer working on fixed-term contracts, applying for a mortgage

Fixed-term contracts are more attractive to lenders if they have been renewed at least once or will not expire for six months. Lenders will consider whether you have been in the same job for the past few years or if you’ve held a variety of roles. While it is possible to be in the same position, it is unnecessary.

For most lenders, the key is how much you make and how long-term that income will be. Advisors with expertise in this field are available to assist you. The question here is: Can a freelancer get a mortgage?

If you are unsure if your freelance or contract income is eligible for a mortgage, please click the link below to access financial advice from our brokers regulated by the financial conduct authority.

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After you’ve approached a lender willing to review your application as a freelancer, most underwriters will evaluate your ability to pay the mortgage like any other applicant.

The first step would be to determine your income.

  • Sole traders would use their net profit, often the average of the last three years, but some will use the most recent, which may be more and offer a bigger loan.
  • Directors of Ltd companies: While most lenders consider salary + dividends for their loan amounts, some lenders may also look at the share of (retained?) net profit.
  • Contractors: Lenders will typically look at the total contract value or the daily rate. Lenders tend to multiply daily earnings by five days per week. They also consider the number of work weeks (typically 46-48 weeks) to determine how much you can expect to make each year.
  • Employed workers: Basic Salary + Any Additional Income Lines (which could be considered 100% to 0% depending on what and how consistent/sustainable it is).

You can use an online calculator to estimate how much you might be able to borrow to get a mortgage if you are a freelancer working on a contract basis. If you prefer a more concrete answer, click the link below:

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Can freelancers get a buy to let mortgage?

This is possible if you are a freelancer looking for a mortgage to buy to let, however many lenders require borrowers to have a minimum income. This can lead to borrowers with variable incomes or incomes that are difficult to prove. As a result, some lenders have a £15k income threshold, while others have £20k and others even more than £25k.

Some lenders do not require a minimum income requirement, provided you have a primary residence, and the purchase is to buy a property to rent out and the rental income must be sufficient to cover the mortgage.

Most buy-to-let lenders will consider your income if you don’t have a property. They would not be concerned about your personal income being used to purchase a property to live in, and they won’t ask for proof that it is affordable.

Lenders will consider a mortgage if you have a primary residence and are a landlord with a portfolio.

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Can bad credit history impact a freelance mortgage application?

Adverse credit is the term used to describe someone with credit problems on their credit file. This records your payment history for six years. While a less-than-perfect record in repaying credit obligations is not always a problem, it can pose problems with new lenders depending on the type and date of the credit issue.

Some lenders will consider all credit issues, and they include:

  • Credit score low
  • Late payments
  • Mortgage arrears
  • Defaults
  • CCJs
  • Debt management plans
  • IVA
  • Bankruptcy
  • Repossession

Credit issues can restrict the lenders you have access to. If you’re a freelancer, your options may be even smaller. However, there are mortgage lenders for bad credit. They will accept freelance income, certain dates and types of adverse credit. This depends on the loan amount.

Ask one of our expert brokers to get an idea of your eligibility and then be introduced to a provider to suit you.

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Joint mortgages with one freelancer, one employed applicant

There may be two applicants, one working and one freelancing. However, not all mortgage lenders will consider the income of the self-employed. Self-employed people can click here – joint mortgage – which calculates how much you can afford.

Lenders who refuse to accept freelance income might consider the applicant a financial dependent. This can mean that the applicant’s affordability is not based solely on their income. Lenders may also factor in additional food for the household. Freelancers need to be advised on how to get a mortgage.

To avoid a further reduction in affordability, if no lender accepts freelance income, it might be a good idea to apply for a mortgage in your name.

Talk to a professional mortgage advisor if you are a freelancer.

By clicking the link below, you can begin your mortgage journey. If you are self-employed or a freelancer, ensure your business accounts and personal accounts are to hand and be aware that your credit rating will be checked.

Contact us today for expert advice right away

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