Mortgages for freelancers

Lenders need to assess whether you’re going to be able to afford to pay back the money that you borrow. A lot of the time, mainstream lenders find this difficult when someone is freelance  because the flexibility of your job means that your income can fluctuate. So lenders are less able to get a clear idea of your finances and affordability.

Freelancers are often considered riskier by the mainstream lenders (high-street banks). Usually, they won’t take the time to understand how you make your money. They may even tell you it can’t be done, when it can. That’s because most lenders prefer ‘vanilla people’; those in regular jobs, with regular incomes that are paid...regularly. Fortunately we know lots of lenders who don’t feel this way.

There’s lots of lenders who’ll give you a mortgage. You just need to meet the right freelance mortgage broker. And that’s where we come in. Make an enquiry to speak to one of our freelance Mortgage Experts.

The length of time that you’ve been freelancing is a big factor that a lender will take into consideration when looking at your application. Essentially, the longer that you’ve been doing it, the more convinced a lender will be that you’re financially stable.

Lots of lenders will want you to provide accounts for the past three years, however, there are some that will accept two or even one years’. Best thing to do is to speak to a specialist freelance mortgage broker (like us!) who can assess your options.

Your income can vary as a freelancer, which makes working out how much you can borrow a little trickier. Most lenders will use an average of the last three years of your net income to work out your affordability. This will also be the case if you’re a sole trader. However if you’re a director of a limited company, lenders may also consider your salary, dividends and sometimes your retained profits too. 

If most of your freelancing work is contract-based then lenders will probably assess the overall value of your contracts. Other lenders may base your affordability on your day-rate.

Lenders will normally carry out an affordability check to work out how much they can lend you. As a freelancer, this is usually three times what your yearly earnings are. But sometimes mortgage lenders will let you borrow up to five or even six times your earnings. 

Lenders will also look at other affordability criteria such as how much deposit you have, any existing financial commitments (including debt repayments and fixed outgoings) and your credit history. Don’t worry - they look at this criteria with employed applicants too.

To find a freelancer-friendly lender and get advice on how much you’ll be able to borrow, make an enquiry and speak to a Mortgage Expert.

The primary ways to prove your income as a freelancer is through detailed accounts of all your income and outgoings during the time that you’ve been trading. You can also show copies of your bank statements to show money coming in, as well as income tax statements too.

It’s important to know that lenders will assess your application according to your latest income which you’ll need to show is guaranteed and stable. Lenders need to have confidence you’ll be able to afford your mortgage repayments and will always try to avoid offering a mortgage to a freelancer if there's a risk of having a period with no money coming in. Having proof of contracts for future work will boost your chances of being approved!

Along with your accounts, you’ll usually be asked for at least three months of bank statements and your credit report too. This is because lenders want to see how you spend your money and whether you repay loans on time. If you’re a sole trader, you’ll need to get a SA302 tax return from the HMRC and if you’re a limited company a qualified accountant will need to sign off your accounts.

Contractors are workers who take on a contract of work usually on a full-time basis. The rates of the contract are agreed before the work starts, and paid at agreed milestones. Freelancers are self-employed and can work for multiple clients at once. The different roles have different implications for proving income.

Read more in our Guide: Can I Get a Mortgage as a Contractor?