Mortgages for Freelancers
Looking at getting a mortgage as a freelancer? It can be done! Find out how much you can borrow & the exact steps you need to take in our expert guide.
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Author: Pete Mugleston - Mortgage Expert, MD
Updated: December 13, 2021
Freelancer mortgages are a topic that’s surrounded by a lot of mystery and misinformation. Many freelancers mistakenly believe that their employment status will make them ineligible for mainstream mortgages, which isn’t the case.
In this article, we’ll correct the misconceptions but also get to the root of them, explaining the various difficulties you might face and how to approach them to improve your chances of success.
The following topics are covered below...
Can you get a mortgage as a freelancer?
Yes, you can! As a freelancer, you’ll have access to the same range of mortgages as any other applicant. At the time of writing, typical rates are between 1.5% and 3.5%.
Simply ticking the ‘freelance’ box on the form instead of the ‘employed’ box won’t trigger a rejection. It won’t automatically change the rate or the size of deposit you’ll need.
However, it might mean you need to work a little bit harder than other applicants to convince your lender that you have a reliable income.
You’ll need to show them how much you’ve earned in recent years and satisfy them that you’ll be able to maintain this income level in the future. So, you’ll need to gather a lot of documentary evidence.
You might also find it difficult to borrow as much as you need if your income is consistently low, if it has recently fallen, or if it significantly varies year to year.
This won’t make it impossible to get a mortgage, but it could make it more difficult to find the right lender.
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How much can you borrow?
A good rule of thumb is that you can generally get a mortgage loan of four or five times your annual income.
So, if your annual income is £30,000, you can probably borrow between £120,000 and £150,000.
That’s pretty straightforward if you earn an annual salary and can show your payslips to prove it. It’s not quite as simple if you’re a freelancer.
Your income might rise or fall from one year to the next and it could come from numerous different employers or clients.
If you freelance on a contractor basis, you can use our contractor mortgage calculator below to get an idea of what your maximum borrowing will be.
Contractor Mortgage Affordability Calculator
Our contractor mortgage calculator will tell you how much you can borrow, whether you work in an employed or self-employed capacity. Select your trading style below, enter the relevant details about your income and our calculator will do the rest.
You could borrow up to
Most lenders would consider letting you borrow
This is based on a multiple of 3-4.5 times your income, a standard calculation used by the majority of UK mortgage lenders. You should speak to a mortgage broker for bespoke calculations if you have been contracting for less than 12 months, your contract is coming to an end, or there is uncertainty around your long-term employment.
This is based on a multiple of 3-4.5 times your income, a standard calculation used by the majority of UK mortgage lenders. You should speak to a broker for bespoke calculations if you’ve been self-employed for less than 2-3 years, have declining profits or fluctuating income.
Some lenders would consider letting you borrow
This is based on 5 times your income, a calculation only some lenders are willing to offer. You may struggle to find a lender who will offer this income multiple to an employed contractor without the help of a broker, and you should seek advice from one regardless if there is any uncertainty around your employment situation.
This is based on 5 times your income, a calculation only some lenders offer. You might need a broker to access this salary multiple and should take advice from one regardless if you’ve been self-employed for less than 2-3 years, have declining profits or fluctuating income.
A minority of lenders would consider letting you borrow
Only a small number of options are available for employed contractors who want to borrow based on this salary multiple. Few UK mortgage lenders offer mortgages based on x6 income under any circumstances, and you’ll almost certainly need the help of a specialist mortgage broker who knows this corner of the market inside out to access them.
Only a small number of options are available for self-employed contractors who want to borrow based on this salary multiple, as few mortgage providers are willing to offer 6 times salary deals. You’ll almost certainly need the help of a mortgage broker to borrow this amount.
Get Started with an expert broker to find out exactly how much you could borrow.
How long do you need to have been trading?
So, many lenders will want to see your accounts for at least three years, which must have been certified by a qualified accountant.
Most will look at your net profit for each year (i.e. your total earnings minus your business expenses) and take an average of the last three years.
However, not all lenders work the same way.
Here are some of the possible variations:
- Some lenders will take an average of your net profits in just the last two years
- Some will only use the most recent year’s net profit, if it is lower than the previous year
- Some will only use the most recent year’s figure, if profits have been steadily increasing
- Some will use whichever is lower: the most recent year or an average of the previous two
If you approach the wrong lender, you might be offered less than you can truly afford, simply because of the calculation they’ve used.
A lot of freelancers find that the best way to avoid this is by working with a broker who specialises in freelance mortgages.
How a broker can help
A broker’s role is to help you find a mortgage for the amount you need at the best possible rate and make the application process as easy as possible.
They can help in various ways.
Reviewing your paperwork
To apply for a mortgage, you’ll need to provide:
- Your certified accounts for the last three years
- Your SA302 (HMRC self-assessment) for the last three years
- Your current freelance contracts
- Evidence of any other income streams, e.g. rental income, trust income, or pension income
Before you apply, a broker can examine your paperwork and recommend how to present your accounts to maximise your borrowing.
Depending on your situation, they might suggest that you include a projection of your earnings for the current year to show an upward trend, or submit just your most recent year’s accounts if that’s your best year.
Finding the best deal
Your broker will identify the lenders who are most likely to approve a mortgage for the amount you need on the best possible terms.
They’ll compare the deals on offer and the rates you’ll be eligible for. Then they’ll help you understand the total costs and advise you on which mortgage is the best for your circumstances.
It’s important to work with a broker who has whole-of-market access and isn’t limited to products from a specific lender or lenders.
Those lenders might not be able to approve you for the amount you need or offer the best rates.
Making your application
Finally, your broker will make an application on your behalf. They might request that your case is underwritten manually, rather than using a computer system, so that you can explain any fluctuations in your income to a real person.
You’re far more likely to be accepted on your first application if you work with a broker than if you work alone.
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Overcoming the challenges of borrowing as a freelancer
There are several other issues that freelancers commonly face when applying for a mortgage. Each can be overcome with the right strategy.
If you’re newly self-employed
Having less than two years’ accounts will limit your choice of lenders, but there are a handful who will accept applications from freelancers with just one year’s accounts.
They might also accept a projection for this year’s net profit as the most recent year. You just need to know which lender to approach.
If you don’t have an accountant
Not all lenders will accept accounts that weren’t prepared by a chartered or certified accountant, but several will.
You may also be able to apply using the figures from your SA302 self-assessment tax return instead. Your broker will ensure you don’t waste time on applications to lenders who won’t accept your accounts.
If you’ve made a loss
If you’ve spent more on business than you’ve made in profit this year, it will complicate the lender’s affordability assessment.
However, some will be prepared to disregard your most recent year’s accounts if you can demonstrate a steady income in previous years (particularly if the loss is COVID-related).
If you have a low income
Having a low income, whether it’s from freelance work or traditional employment, will limit how much you can borrow.
Speaking to a low-income mortgage expert can help, as they will advise on other sources of income you could include in your application (such as government benefits) or other ways to improve your chances (such as saving a larger deposit).
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Finding a broker experienced in mortgages for freelancers
Most brokers don’t regularly handle applications from freelancers and so aren’t familiar with the challenges you face and how to approach them.
It’s best to work with someone who specialises in this area and can give you advice based on their previous experience.
One easy way to find the right broker is to use our free matching service.
You simply tell us what you need, like a broker who works with freelance applicants, and we’ll put you in touch with a suitable specialist for a free, no-obligation chat.
To try it out, call 0808 189 0463 or complete our online form to get started today.
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Mortgage Expert, MD
About the author
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!