Mortgages for Freelancers – How to Get a Mortgage When You’re Self-Employed
You work for yourself, win projects, and manage your income. When you apply for a mortgage, it can make the process more daunting due to the fluctuations in income.
With the right preparation and a broker who understands freelance income, you can apply for a mortgage on fair terms.
Can you get a mortgage as a freelancer
Yes, you can. The process can be more involved than for someone on a regular salary, because lenders want clear evidence of stable earnings.
Your income may rise and fall across the year, so you need to present a strong picture of long term affordability. This usually means showing income for multiple years so the lender can get a full understanding of how much you earn.
Who is classed as a freelancer
You are typically classed as freelance if you provide services to one or more clients on a project basis and you pay your own tax.
That covers many roles, from designers and developers to consultants and journalists. You might trade as a sole trader, operate a limited company, or work through contracts that pay a day rate.
Each setup is acceptable in principle. Lenders simply assess the income evidence in slightly different ways.
How lenders assess your income
Lenders want to understand how you earn, what you keep after costs, and whether the level looks sustainable. They like to see a track record rather than looking at the income over a short term (how perhaps a PAYE employee may be underwritten).
Sole trader or partnership
You usually show your tax calculations and tax year overviews. Lenders usually then take your net profit. Many use an average of the last two or three years. Some will use the latest year if it is lower. A consistent track record helps. If your most recent year improved, a broker can explain why that uplift is likely to continue, to the lenders that consider the latest year.
Limited company director
Lenders often look at your salary plus dividends. Some may also consider your share of net profit, depending on policy and the strength of your accounts.
Having properly prepared accounts and notes from a qualified accountant can support your case.
This is the case for applicants that own over a certain percentage of a company, for instance 20%.
Freelance contractors on a day rate
If most income is contract based, some lenders work from your day rate and contract length. They annualise the figure using a set number of working days. Clear evidence of renewals or ongoing client demand strengthens your position. Make sure your contract confirms the rate and any extension options.
This usually only works when you are working for one company at a time for a set period, such as one year.
Find out Your Options
How much can you borrow
Your borrowing usually depends on an affordability assessment. Lenders start with your accepted income and weigh this against your regular spending and any commitments. Many will offer around four to five times annual income. The exact figure varies by lender, credit profile, term, deposit size, and how stable your income looks over time.
If you want an early sense check, Kerr & Watson can profile your income as lenders would, then outline a realistic range.
Deposit and credit profile
A larger deposit lowers risk for the lender and may unlock better rates. Many applicants succeed with ten percent deposits. Five percent options exist in some cases.
Your credit record also matters. Clean conduct on borrowing, on time payments, and low balances can improve choice and pricing.
If your credit history has bumps, you may still have options.
A broker can steer you toward lenders who are comfortable with your profile.
Documents you should prepare
Good preparation speeds everything up and helps secure a better outcome. Aim to gather:
- Latest tax calculations and tax year overviews or signed company accounts
- Recent bank statements showing income received and regular outgoings
- Current contracts and any renewals or letters of extension
- Identification and proof of address
- A summary of ongoing credit commitments
If your income fluctuates, add context. Explain why a quiet quarter occurred or why the latest year is higher, for example, income improving as your business becomes more established. Include evidence of pipeline work if you can.
Newly self-employed and contract length
Many lenders like to see two years of figures when you are self-employed. That said, it can still be possible with less history, especially when you have strong sector experience or a current contract at a solid day rate with time remaining on the contract.
Confirm how long the contract has left to run, the notice terms, and whether renewals are likely.
Conclusion
You can get a mortgage as a freelancer when you meet lender criteria. The key is to evidence past income, sustainable future income, and choose lenders who understand how you work.
If your case is meeting criteria, you can borrow at competitive terms like any other borrower.
If you want to explore how much you can borrow and how to improve your case, speak to Kerr & Watson for bespoke advice.
