Can I Get a Mortgage if I’m Freelance?

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Can I Get a Mortgage if I’m Freelance?

Can I Get a Mortgage if I’m Freelance? (Part 1)

Paul talks to us about how the mortgage process works if you are a freelancer. Episode one of two, recorded in June 2024.

What is a self-employed freelancer?

The definition of a freelancer is someone who’s self-employed and not committed to a particular long-term employer. It’s someone who would do ad hoc work on a very flexible basis, with no long term commitment.

You might think that’s the same as a lot of self-employed people, but freelancing tends to apply to certain professions such as a photographer or a content writer. It’s someone that does things for a particular employer for a short period of time and on a very flexible basis.

Can you get a mortgage as a freelancer? How hard is it to do this?

Yes, you absolutely can get a mortgage as a freelancer. How hard it is really depends on the setup and the circumstances for that particular individual.

In some instances, you could find it easier than an employed person to get a mortgage, or you could really struggle. The devil’s in the detail when it comes to evidencing your income and securing a mortgage. It’s going to be on a case-by-case basis.

What types of mortgages can I get if I’m a freelancer?

On a conventional level, you can get all the types of mortgages you can think of – things like residential, Buy to Let, limited company commercial mortgages, etcetera.

But there are always going to be particular schemes that are only available to employed applicants. We just need to avoid those little schemes that certain lenders offer, like the Helping Hand Scheme from Nationwide, which provides enhanced affordability.

The borrowing is going to be a little bit more with the Helping Hand product – but a freelancer is not able to apply for those sorts of schemes. But on a conventional mortgage level, you’re all set, you’re good to go.

How do I know if I’m classed as a freelancer? How long do you have to be a freelancer before getting a mortgage?

You’re probably going to know if you’re a freelancer, but generally speaking, you’re going to be self-employed and doing things on a short-term basis. You’re not going to be tied down to one employer and you’re getting paid by multiple different people.

Usually, freelancers are set up on a sole trader basis. Sometimes they might be limited, or in a partnership. But generally, nine times out of 10, you’re going to be a sole trader.

If that’s the case, you need to have been trading for at least 12 months to secure conventional mortgages. Once you’ve hit that 12-month mark, start discussing your circumstances with a broker.

So don’t make the mistake of thinking that because you’re self-employed, you’re going to need three years’ books behind you. As soon as you’re at the 12-month point, sit down with us and go through your situation.

The worst case scenario might be a six-month roadmap towards getting a mortgage, but you’re eligible from the point where you’ve been trading for 12 months.

How much can I borrow on a mortgage as a freelancer?

The maximum loan amount you can take is going to be assessed the same way as always. Each lender will differ in how they find your annual income figure to enter into their calculator.

For example, some will use your latest year’s figures, some will use an average of the last two, some will use an average of the last three. Once they have that figure, they’re going to then apply a multiple to that.

Again, with some it will be four, with others it will be 4.5 or 4.75 times. It will all depend on the lender you go to. Lastly, they’re going to factor in your background living costs and other commitments. So ultimately the loan amount is likely to vary by quite a large margin.

In some instances, especially with freelancers, contractors and the self-employed, we can see a difference of as much as £200,000 between the most generous and the least generous lender. It’s very important to assess a whole of market approach when you’re looking at affordability for people who are self-employed.

How do lenders assess mortgages for freelancers? What documents do I need to have ready?

They’re going to be looking for that income to put into the calculator. The evidence you’re going to need to produce as a freelancer is generally going to be your tax calculations – what you’ve submitted to HMRC as your earned income over that tax period from April to April.

You’ve taken away all the costs to your business so we’re left with the profit from self-employment. That’s the figure lenders enter into the calculator. To evidence that, you’re going to need SA302s, which are also known as tax calculations or tax computations, depending on where you get them from. That goes hand in hand with a corresponding tax year overview document.

You’re also going to need bank statements to show your personal income and outgoings, and some identification as well. We need a passport or driving licence, some address proof, and potentially proof of where your deposit is coming from.

If it’s tied up in your house, that’s fine. If it’s cash or a gift, you’re going to need to display that.

How much deposit will I need for a mortgage if I’m freelance?

Most conventional mortgages start from a 5% deposit. If you can then borrow the remaining 95% on a mortgage based on your affordability, you’ve got 100% of the purchase price. Being freelance is not going to take away those 5% deposit options.

Going one step further, there is now a ‘1% mortgage’ that’s available. It’s in fact a £5,000 deposit mortgage, and you can buy up to a £500,000 property with that – which is 1%. Obviously, if you’re buying a £200,000 property with that £5,000 deposit, it’s more than 1%. But if you can afford that based on your income situation, that’s a scheme that might work for you [podcast recorded in June 2024].

It comes with lots of different criteria, and we’ll probably do a separate podcast about that at some point. But just because you’re a freelancer, you don’t have to stump up 10%, 15% or 20% deposits. Higher deposits come with other reasons behind them, things like credit situations or affordability.

Can I get a mortgage if I’m employed with a part-time or fluctuating income?

Yes. Realistically, we can use any income that you can evidence. If you’re part-time or your income is fluctuating, that’s not a problem. As long as you’ve submitted a set of accounts to HMRC with a figure on it, there’s a good chance we can use it to apply for a mortgage.

A lot of the time there is a secondary income to throw in – perhaps your partner’s earnings, or you might be employed and do a bit of freelance at weekends, like a wedding photographer. If you’ve got an income that’s been submitted to HMRC and you pay tax on that income, it can go into the calculator.

A lot of things people do are seasonal, like that wedding photographer. But if you’ve got income that’s going to HMRC, it doesn’t matter if it’s fluctuating. You’re going to be able to get a mortgage, subject to everything else stacking up.