When you become a freelancer there are many advantages and disadvantages. Flexibility and independence are often the main drivers, but also the potential financial rewards and work/life balance that comes with working more flexibly.
As a result, freelancers often find that they fall in the crack between ‘employed’ and ‘self-employed’ and in this, obtaining a mortgage to buy a home or re-mortgage can become slightly more complex and challenging.
Freelancers can find that obtaining a mortgage directly from a lender can be tricky however, as the number of freelancers and contractors in the UK increases, mortgage lenders are becoming more willing to lend. We as brokers are seeing a rise in demand from freelancers for assistance because we have access to the whole market and know how to match you with the most appropriate lender.
At Resolve, we have been working with a number of freelancers in various industries (e.g., PR, I.T. or Marketing) for a number of years and can bring this knowledge and experience to the table to benefit our clients. We are specialist freelance mortgage brokers, who understand the industry and know the lenders that will suit different circumstances.
Freelancers applying for a mortgage
When trying to secure a mortgage, the length of time you’ve been a freelancer is something the lender will consider. Most lenders want accounts covering at least two to three years although some will consider freelancers with only one year’s accounts but with a history in their particular field. Over time having a variable income as a freelancer is something that becomes less of an issue because we are able to build a picture of how reliable your income is.
If you have been working for a company as a freelancer for a long time then a mortgage lender will often average out the income you’ve earned over recent years. This will give them your average income which they can use to work out how much you can afford to repay each month. If however, your earnings have dramatically fluctuated over the years they would take the most recent year (or lowest) as an indication of your earning capacity. This may result in you being able to borrow a smaller sum of money.
Getting a mortgage if you are a self-employed freelancer
If you are self-employed in the UK, lenders will want to have two to three years accounts from you as evidence of your income. Some will even consider just one year of accounts. You may be working as a sole trader or have set yourself up as a Limited Company. If you are a sole trader then you will usually be expected to provide copies of your tax returns while if you are a Limited Company then the accounts would need to be prepared by an accountant, usually one that is chartered or certified.
Freelancers on Fixed Term Contracts
Lenders will consider you more favourably if you are a freelancer on a contract that has a fixed date. They will usually expect you to have done this for at least twelve months with a period remaining, usually three to six months.
Lenders will also investigate if you have been in the same profession over the past few years. If you have been in the same role then this again will be favourable.
At the end of the day, most lenders will primarily be interested in the amount and sustainability of your income.
If you are a contractor as opposed to a freelancer then alternative rules apply and more information about this can be found here: Mortgages for contractors.
How you can help the process
If you are looking for a mortgage for freelancers, then you can help the process by offering a larger deposit and therefore borrowing a smaller amount. Mortgage lenders also look for security so evidence of agreements with your current or past clients will make your application more appealing. Try not to take any breaks between client agreements in the run up to purchasing a property as lenders may be wary if they see you out of work for more than eight weeks. Consider checking your credit score and seeing whether you need to work on improving this.
If you are a freelancer, it would be very beneficial to speak with us. We can help you find out how much you can borrow and find you a lender that accepts mortgages from people in your situation and we would help you navigate the application process.
*Please note: Your home maybe repossessed if you do not keep up repayments on your mortgage.