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.
Many of the freelancers we speak to are unsure how they go about getting a mortgage.
This guide aims to help with that. We'll discuss how lenders assess mortgage applications from freelancers, how much deposit you'll need, maximum borrowing amounts and many other frequently asked questions we get asked by freelancers.
- Can I get a mortgage as a freelancer?
- How many year's accounts will I need?
- What size deposit will I need as a freelancer?
- Will lenders consider me a contractor for mortgage purposes?
- How do lenders assess mortgage affordability?
- How much can a freelancer borrow?
- How is a freelancer's income assessed?
- Getting freelancer mortgage advice
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.