Nowadays, it's estimated that there are around 2.6 million freelancers/contractors working full time across the UK and 7.4 million engage in freelance work in some type of way.
However, It can still be difficult to successfully get through the process of getting a mortgage if you're a freelancer, and that’s why today we’re going to discuss whether it’s possible to get a mortgage as a freelance, and give you everything you need to know about this topic.
Can You Get a Mortgage as a Freelancer?
The short answer is yes, but lenders are definitely more cautious. This is because they will need to confirm whether your income is stable enough to be able to cover the mortgage payments—thus, you have to provide more information on your earnings than someone working full time so to speak.
The good news is that, yes, you can get a mortgage as a freelancer, but only if you meet the required criteria given to you by your lender. Some lenders won’t want to offer self employed mortgages, but there are certainly some that will give you that chance… and they’re the ones you need to be looking for.
What Types of Mortgages Can Freelancers Get?
As a freelancer or contractor, you are no different to anyone else and you can apply for all the same mortgages - it may just be that lenders are harder to come across and there’ll be a more rigorous process to get the home you want.
Here is a breakdown of the most common types of mortgages you can look at applying for:
As you can see, there are different types of mortgages you can apply for with varying factors to consider. Of course, if you’re a full-time freelancer or contractor, it may be worth speakijng with an expert that deals with self-employed mortgages to give you a better idea on what your situation could look like.
What Do You Need to Get a Mortgage as a Freelancer?
In terms of what you need to show and provide to get a mortgage as a freelancer, this obviously differs from lender to lender, but here is what they typically ask for:
- You have 1-3 years of accounts or tax returns
- You have 2-3 years ideally of freelance work (sometimes one year is fine)
- A good credit score and credit history is massive (shows you pay back debt)
- They need to look through personal and business bank accounts
- Proof your business/freelance work is going to continue to thrive
- You’ll need to give proof of deposit and all your ID documents
Although it may feel like a never ending process, if you do it correctly and do your due diligence through a mortgage broker near you, bank, building society, etc., they’ll be much easier to deal with.
What to Do Before Applying to Best Prepare You?
It is probably best that you prepare the following documents, so that everything is smooth sailing during your mortgage application process:
- Gather your invoices
- Get together your personal and business bank statements
- You’ll need to get your SA302 tax calculations
- Provide proof of upcoming contracts and current/future income
These are the type of documents the lender will ask for, so it’s always best to have them ready, so you’re not stressing to meet deadlines.
Why Do Freelancers Typically Struggle To Get A Mortgage?
Freelancers often struggle to get a mortgage because of income (or stability of it). Especially if you have only just established yourself as a freelancer, it can be difficult to prove to lenders that you have sufficient proof of income.
For example, if you have just exited the employed world and transitioned into self-employment, there will be limited information on how and if you can potentially afford the monthly mortgage payments. Check out what your monthly repayments could be here with our repayment calculator!
What Will Lenders Class as a ‘Freelancer’ or ‘Contractor’?
Every lender defines freelancers and contractors slightly differently, but in most cases, you are someone who isn’t paid a fixed salary by one employer.
You’ll generally fall under one of these categories:
- Sole Trader - You work for yourself and submit self-assessment tax returns each year
- Limited Company Director - You run your own business and often pay yourself through dividends and salary
- Contractor - You work for one or more clients on short or fixed-term contracts, for example, three or six months at a time
- Gig Worker - You take on much smaller projects more often, working with lots of different clients
Lenders usually treat all these groups as self-employed, meaning your income needs to be proven through tax documents, accounts, or contracts rather than traditional payslips.
What About if You’re a Part-Time Employee, Part-Time Freelancer?
This would actually work in your favour for most lenders as they will not only see that you have multiple income streams, but that you do have a stable income from your part-time job. Of course, it’s not as guaranteed as a full-time job, but it certainly helps your cause when applying for a mortgage.
Quick note: Separating your business income and part-time job income will really help your application, as it can help them understand both incomes and the predictability of them both for mortgage repayment purposes.
Do You Need a Bigger Deposit if You’re a Freelancer?
You don’t necessarily need a bigger deposit if you’re a freelancer or contractor, but it may ultimately help the lender make a decision on whether or not to allow your application to be accepted. A bigger deposit may help even more if you’re newer to freelance or your income is less consistent, as bigger mortgage repayments may flag risk on their end.
Making sure you have all the boxes ticked under the section: ‘What Do You Need to Get a Mortgage as a Freelancer?’ will certainly help your cause as a freelancer wanting a mortgage.
Speak to Our Team of Expert Mortgage Advisors
Whether you're a freelancer/contractor looking for a first-time buyer mortgage or you're a home mover, it's possible that Bell Financial Solutions can help in securing you a mortgage.
However, at least initially, there are no guarantees and we would offer a free consultation where we would learn more about your current personal circumstances, years and experience as a freelancer, and further information that would be necessary before a mortgage application.
At Bell Financial Solutions, we provide a comprehensive service and do all the work for you to give you the very best chance of securing your mortgage for your first or new home.
For more information, please call us today on 0161 791 4757 or book your appointment.
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