How To Get A Freelancer Mortgage

With as little as one year's trading history. Learn how lenders assess freelancer income, how the maximum borrowing amount is calculated, deposit requirements & more...

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Graham Cox
CeMAP Mortgage & CPSP Specialist Finance Advisor

There's almost 2.2 million freelancers in the UK. And with increasing numbers of people starting their own business and working from home, this trend looks likely to continue.

In this plain English guide to freelancer mortgages, you'll learn how lenders assess freelancer income and calculate the maximum borrowing amount, minimum deposit requirements and much more.

Can I get a mortgage as a freelancer?

Yes, you absolutely can get a mortgage as a freelancer. Lenders will consider your application much like any other self-employed mortgage borrower.

In most cases, lenders don't have separate mortgage products for freelancers or self-employed people; so you'll have access to exactly the same deals as employed applicants.

What is different is the eligibilty criteria lenders use, and how your income is assessed. But more on that in a minute.

How many year's accounts will I need?

It depends on the lender. There are self-employed friendly providers, including some niche mortgage lenders, who are prepared to consider applicant's with 1 year's completed and HMRC submitted accounts.  

Nearly all mainstream lenders require at least 2 years of company accounts.

It's worth considering that the range of providers and mortgage products available to you will be much smaller with just one year's books.

Depending on which lender's eligibility criteria you fit, you could also require a larger deposit than would be the case if you had two years accounts.

What size deposit will I need as a freelancer?

It's entirely possible to get a 5% deposit mortgage as a freelancer. But it's harder to find a lender at 95% ltv with only one year's trading accounts or history.

What's more, because you're putting the minimum deposit down, the interest rate on the mortgage loan will be higher, so you'll pay more in interest over the lifetime of the mortgage.

Cheaper deals are available with a 10 or 15% deposit, whilst the very best rates are reserved for those with at least a 40% deposit.

From the lender's point of view, the higher your deposit, the lower the risk to the lender, and their rates are set accordingly

The other factor affecting how much deposit you'll need is whether you are buying a house or flat.  

Banks and building societies consider a property with a leasehold tenure inferior security to a freehold because the flat or maisonette becomes less valuable as the duration of the lease decreases. Particularly as it approaches 80 years remaining.

That's why flat purchases usually require a 10-20% deposit, although a 5% deposit is still possible with a few lenders.

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Will lenders consider me a contractor for mortgage purposes?

No. There are some key differences between contractors and freelancers, and lenders treat their applications slightly differently.

A contractor usually gets paid a day rate, works for one client at a time, and often has a fixed-term contract.

Depending on their circumstances and income level, contractors can be treated as self-employed or employed for mortgage purposes.

A freelancer, for the purposes of a mortgage application, is defined as a self-employed person who works for multiple businesses simultaneously.  

One thing contractors and freelancers do have in common, is they can be set up either as a sole trader or a limited company.  How lenders assess your freelancing income will therefore come down to which business structure you choose.

How do lenders assess mortgage affordability?

The affordability and sustainability of the mortgage is assessed by the lender's underwriting team, based on your income, expenditure, credit score and other factors, such as whether you have any financial dependents.

Expenditure is broken down into two segments, committed expenditure and discretionary expenditure.  

For obvious reasons, committed expenditure is the most important. Car finance plans, personal loans or credit/store card balances are all examples of committed expenditure.

But it could also be things like private school fees or child maintenance. Any ongoing payment you couldn't hit the pause button on immediately if you needed to.

Committed expenditure is one of the main reasons mortgage applications fail. So it's well worth reviewing your committed expenditure beforehand, and clearing what you can.

Discretionary income is, of course, any expenditure that you could cut out at short notice if you needed to. Entertainment (all those pesky streaming tv subscriptions!), dining out, pay-as-you-go gym memberships and so on.

How much can a freelancer borrow?

Subject to an affordability assessment, most lenders will lend at around 4.5 times single or joint income.

For high earners or high net worth individuals, some providers will even lend up to 5.5 or 6 x income, subject to meeting the lender's criteria. Every lender defines a high-earner differently. But earnings of £75,000 per annum for a single applicant or £100,000 p.a. joint income is a good benchmark.

Here's an example. Gary is a sole trader and works as a freelance graphic designer for several, loyal clients. He's just completed two years' accounts.  In year one, he made a pre-tax net profit of £43000, and £57000 net profit in year two.  

Most lenders in this scenario will average Gary's two years accounts. Assuming Gary has a sufficient deposit, he could likely borrow up to £225,000 (£50,000 x 4.5) on his mortgage.

However, some mortgage providers will be happy to work off Gary's latest year's figures, allowing him to borrow 4.5 x £57000 for a maximum borrowing amount of £256,500.

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How Is a freelancer's income assessed?

Mortgage providers will use your net profit (before tax) if you're a sole trader freelancer.

For limited company directors, most banks and building societies will use your salary and dividends. Some do consider salary and net profit, usually post corporation tax.

A few other providers will look at salary, dividends and your share of the latest year's retained (a.k.a. retained earnings) profits, as shown on the balance sheet.

You'll find that most lenders will average your income over the past two years' accounts. Where income has fallen in the most recent year, they'll nearly always use those lower figures, instead of the average.

Visit our comprehensive documentation checklist for details of how to prove your income to lenders.

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"Brilliant from start to finish. Graham managed to find a main high street lender who offered a brilliant rate. Would highly recommend."

Tracy Boyle - Google Business Review
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Getting Freelance Mortgage Advice

When it comes to securing a mortgage, freelancing is no different to any other type of self-employed business.

All lenders are looking for, is a proven trading record of profits and income that will allow you to sustainably afford the mortgage, alongside your other outgoings.

As an independent, whole-of-market broker specialising in self-employed mortgages, we can quickly source the most suitable deal for your circumstances. To make an enquiry, please call 0117 205 0655 or you can get started here in 90 seconds.

Graham Cox - MLIBF CeMAP Mortgage Adviser & Director of Hub FS Ltd

About the author

Graham Cox is the founder of Self Employed Mortgage Hub, the trading name of Hub FS Limited.

Based just north of Bristol, SEMH is an independent, whole of market broker and a true specialist in self employed mortgages, helping business owners across the UK get great mortgage and protection deals.

Graham's market commentary and analyis is regularly quoted in the national press and media, including The Guardian, Telegraph, FT Adviser, and BBC Radio Bristol.