As a freelancer you may have faced difficulty in getting a mortgage through the traditional routes – but fear not, freelancers and self-employed workers can still get their hands on the perfect mortgage for them.
Freelancers benefit from a high degree of flexibility and independence when it comes to their working life – and more people than ever are coming around to the idea of self-employed and freelance life.
However, despite the many benefits a lot of freelancers still feel uncertain where to turn where to turn when they want to buy a house and are in need of a mortgage.
Why do freelancers have problems getting a mortgage?
There are a few reasons why some freelance workers may have difficulties when submitting a mortgage application.
Many people directly approach their bank with a view to getting advice or applying for a mortgage directly. Limiting your options to your bank is generally not the best thing to do in any mortgage process, and that includes freelance mortgages.
Some lenders will fail to recognise that the earning potential of freelancers may actually be higher than those in full-time positions. They will often view it as a less secure loan.
As a result of this, it’s possible that as a freelancer your lender might require you to have as many as two or three years’ worth of financial statements to back up your application.
What types of mortgage can I get as a freelancer?
As a freelancer the following types of mortgages would be the most likely options for you. Every mortgage application is treated on its own merit, so in theory there is no distinction between permanent employees and freelancers, contractors or self-employed workers.
- Limited Company Mortgage: If you have been set up as a limited company, your income will probably be categorised as a salary but lenders will also need to take into consideration any dividends as part of your income as well.
- Sole Trader Mortgage: As a sole trader lenders will expect two to three years’ income statements or trading. The more information you can provide the more likely your application is to be approved.
- Partnership Mortgage: Using similar criteria to those outlined above, the lender will judge your application based on your share of profits.
So can I get a mortgage as a freelancer?
Yes! Despite lenders making life a little more difficult, specialist contractor mortgage brokers like ourselves at Super Contractors ensure that any freelancer can get a mortgage.
Thankfully in recent years banks have begun to adapt to the increasing numbers of contract and freelance workers in the UK – and many have specialist underwriter divisions which deal specifically with contractor mortgages.
Increased scrutiny will be given to the technical content of these mortgage applications. While the underwriter reviewing your application may not be an expert in IT or whatever field you are in, they will have a team that knows the difference between a developer, engineer and a manager and what the long-term outlook is for the work you are carrying out.
Ensuring that lenders understand the risk profile of the candidate is a key part of the process, and can be a delicate thing to manage. A good specialist freelance mortgage adviser will have gone through this process time and time again for many years.
What can I do to improve my chances of getting a mortgage as a freelancer?
There are a number of things you can do as a contractor which will improve your chances of getting a mortgage:
- Offer a larger deposit – borrowing less money from the lender reduces the risk on their behalf
- Maintain a good credit rating – as with any mortgage application it is important to ensure your credit rating is not affected by large credit card debt or missed payments.
- Avoid lengthy contracting breaks – whilst flexibility is a major benefit of contracting, having a major period of inactivity is not likely to be looked upon favourably.
- Show evidence of long-term contracts – ongoing and lengthy agreements with employers show stability and reliability for your application.
Engaging a specialist broker that knows the freelance environment in the UK will help to allay many of the typical concerns that contractors and freelancers have in relation to mortgages. They can help you avoid the need for providing irrelevant revenue and customs documents by approaching the application in the right way.