Mortgages are a necessary part of life for many people. They allow you to purchase a home, which is often the biggest purchase most people make in their lives. But what happens if you are a self-employed freelancer?
Can you still get a mortgage?
The answer is yes, but it can be more difficult. Here’s what you need to know.
As a freelancer, you may have an irregular income. This can make it harder to get a mortgage, because lenders like to see evidence of consistent earnings. They want to know that you’ll be able to repay the mortgage each month, without fail.
We’ve put together some helpful tips on how to get a mortgage as a freelancer. If you want to become a homeowner, they are certainly worth checking out.
What is a freelancer?
A freelancer is someone who works for themselves, rather than for an employer. They are self-employed.
There are many reasons why people choose to become freelancers. For some, it’s the freedom and flexibility that comes with working for yourself. You can often pick and choose your projects, and work around other commitments like childcare or caring for relatives.
Others become freelancers because they have a particular skill or trade that they want to offer to the world. And some people simply can’t find full-time employment and so turn to freelance work to make ends meet
Whatever the reason for becoming a freelancer, it can be a great way to earn a living – but it does come with its own unique challenges, particularly when applying for a mortgage.
Use the right broker
First and foremost, you need to find a specialist mortgage broker who is used to dealing with self-employed applicants. Not all brokers have experience in this area, so it’s important to find one who does.
The broker will help you to understand the different types of mortgage available, and which are suitable for your situation. They will also be able to guide you through the application process, making it as smooth and stress-free as possible.
It’s important to choose a whole of market mortgage broker, so that you can be sure you’re getting the best deal available. They can compare mortgage deals from across the market and find the perfect one for you.
Should you venture into a high street lender, they will only be able to offer you their own products. This means you could miss out on a great deal that’s available elsewhere.
It’s fair to say that a good broker can add a tremendous amount of value where the self-employed and freelance workers are concerned.
Specialist lenders
Once you’ve found a suitable broker, it’s time to start looking at the different mortgage options available. As we mentioned earlier, not all lenders are willing to lend to self-employed applicants. However, there are specialist mortgage providers who cater specifically to this market and better understand the nature of self-employment and working as a freelancer.
These lenders will often require additional information from you, such as tax returns, SA302 and accounts. They may also charge higher interest rates than mainstream lenders. However, they could still offer you a competitive deal if your circumstances are favourable.
Prior to 2011 self-cert mortgages allowed borrowers to apply without needing to prove their income. This was a useful feature for freelancers and the self-employed. Unfortunately they were withdrawn as a consequence of the 2008 financial crisis.
Lenders like stability & low risk
For the lender, freelance applicants can be seen as higher risk than those in full-time employment. This is because your income could drop at any time, and you don’t have the security of a salary payment coming in each month.
They ask a lot of questions about your income and your expenses because they want to know that your income is relatively stable and predictable. They also want to see that you have a good track record when it comes to repaying debts.
Plan ahead
The biggest hurdle to overcome is probably proving your income. If you are able to plan ahead by getting your bank account in order, and making sure your tax is up to date, this could let the lender see a true picture of your earnings. This is particularly important if you know you will be applying for a mortgage in the near future.
It’s a good idea to avoid taking on any extra debt in the months leading up to your application. If you can, pay off any outstanding loans or credit card debts. This will improve your chances of being approved for a mortgage.
Get your paperwork in order
When you’re a freelancer, you need to be extra organised when it comes to your paperwork. This is because you’ll need to provide evidence of your earnings when applying for a mortgage.
If your accounts are up-to-date and in order, this will make the process much easier. Ideally, lenders will want to see at least two years’ worth of accounts, plus bank statements so it’s important to plan ahead.
You will find more useful information in our article: Is a self-employed mortgage based on gross or net profit?
Are mortgages harder to get if you freelance?
The simple answer is yes, but that doesn’t mean it’s impossible to get a great mortgage deal. By following the tips above, you’ll be in a much better position to secure the finance you need. And, with the help of an experienced broker, you could find a mortgage that’s perfect for your needs.
If you’re ready to start looking for a mortgage, we can put you in touch with a whole of market broker who can help. Just complete our quick and easy form and we’ll be in touch shortly.
