Mortgages for Freelancers: Everything You Need to Know

11 min
Important to know

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Securing a mortgage as a freelancer is not as straightforward as that of a full-time employee. Mortgage lenders prefer people in full-time employment due to their easy-to-understand income. In addition, most of the high-street banks cannot handle complex incomes, which makes it challenging to secure a mortgage as a freelancer.

But is it impossible to secure a mortgage as a freelancer? The answer is No. Freelancers can still get a mortgage, even though it may be trickier. Working with the right specialist broker often makes it easier to navigate through those challenges. 

In this article, you will find everything you need to know to secure a mortgage as a freelancer. We will explain how lenders will assess you, how to increase your chances of approval, why speaking to a specialist mortgage broker first is crucial, and more. So read on.

Who is a Freelancer?

A freelancer is a self-employed individual who takes on short-term projects for different clients. People who enjoy having the freedom to choose what they do, where to work, and how many hours they work often become freelancers. Some of the popular sectors where people work as freelancers include:

  • Writing and translation— content writer, copywriter, translator/interpreter, etc.
  • Development and IT —web developer, programmer, data analyst, etc.
  • Design and creative— Website designer, graphic designer, video editor, etc.
  • Sales and marketing— content creator, social media marketer, marketing strategist, etc.
  • Admin and customer support—virtual assistant, database manager, etc.

It is important to note that freelancers differ from contractors due to their ability to work for multiple clients simultaneously. However, being self-employed means that, similar to contractors, they will not be eligible for employee benefits. Fortunately, they can cover it by charging their client a higher fee. 

Can Freelancers Secure a Mortgage?

Yes, you can secure a mortgage as a freelancer. However, getting your desired mortgage will probably be more challenging than when employed in a salaried job. This is mainly due to the complexity surrounding freelancers’ income.

Before approving a mortgage, lenders want to see a stable income. Unfortunately, the monthly income from freelancing is often unstable, which may cause lenders to question your affordability.

But whatever the challenges you may encounter, there are strategies to overcome the stricter qualifying requirements and provide proof of affordability that will satisfy a mortgage lender. In this case, seeking guidance from an experienced mortgage broker is highly recommended, given that it is not always straightforward and every mortgage lender operates differently. 

What do Mortgage Lenders Look for in Freelancers Applying for Mortgage?

As a freelancer, lenders will consider the same factors that apply to employees when reviewing your mortgage application. This includes your age, income, credit score, and credit history. Additionally, lenders could inquire about the following to ensure you can afford the monthly repayments:

  • How long you have been working as a freelancer
  • The type of freelancer you are
  • The number of clients you have
  • Whether or not you have had any previous contracts renewed
  • The duration of your current contract
  • How long you have worked in your field and how much experience you have

How will Lenders Assess my Income as a Freelancer?

A lender will assess your income differently as a freelancer from how they do that of an employee. In addition to proving how much you earn, you must provide details about your work and credit history. This is so because, in contrast to full-time employed individuals with fixed salaries, freelancers’ work can vary significantly from month to month or year to year. 

When applying for a mortgage, a lender often demands your tax returns or detailed business accounts. These consist of every penny you have received and spent while trading. Some specialist lenders will ask for one year of account, but the longer your account history, the better (preferably three years or more). 

Furthermore, lenders will assess your mortgage application based on your current income, which must appear guaranteed and stable. Lenders need to have confidence in your ability to afford your mortgage repayment. 

If there is the possibility that a freelancer will not be making any money for a while, lenders will try to avoid giving them a mortgage. In this case, proof of contracts for upcoming work will increase your chances of getting your application approved. 

In addition to your accounts, lenders often demand your credit report and bank statements dating back at least three months. This is so they can determine how you manage your finances and whether you make timely loan repayments.

How much Can I Borrow as a Freelancer?

Your income is subject to change as a freelancer, adding a bit of complexity to determining how much you can borrow. Lenders typically run an affordability check to determine how much they can lend you. 

As a freelancer, this is often three times your annual earnings. However, you can borrow up to five or even six times your earnings from some mortgage providers.

Lenders will also consider other affordability criteria to determine how much you can borrow. These include your credit history, deposit, and all existing financial commitments, such as fixed outings and debt repayments. 

Can I Secure a Mortgage if I Have Bad Credit as a Freelancer?

A person who has poor credit has struggled to repay a loan in the past. This implies that there is also a chance they will not be able to make timely payments in the future. Therefore, if you have bad credit, lenders may be cautious to approve your application making it difficult to secure a mortgage as a freelancer. 

If you work as a freelancer, getting a mortgage can be more challenging if you have bad credit. This is because you will be limited to fewer lenders who will consider your case. However, everything depends on your situation.

Some specialist lenders can approve your application if you have bad credit. The type of mortgage you can secure depends on factors like the amount you want to borrow, when the poor credit issue happened, and the reason behind it. However, it is always best to improve your credit score before applying for a mortgage. 

How Much Deposit will I Need to Put Down as a Freelancer?

How much you need to put down will depend on your unique circumstances and varies among mortgage lenders. Typically, a good deposit for a mortgage is 10% or more of the property’s value. However, you can still secure a mortgage with a 5% deposit.

Nevertheless, there are a few advantages to making a larger down payment upfront. First, it reduces your Loan to Value (LTV), which implies you will be borrowing less and making lower monthly repayments. Secondly, putting down more deposits upfront shows a bigger commitment to a lender and can open up better mortgage deals with lower interest rates.

Can a Freelancer Secure a Joint Mortgage? 

Yes, you can secure a joint mortgage as a freelancer. However, knowing what the lender wants can help make the process faster. If you are a freelancer, lenders are more likely to approve your joint mortgage application if you are looking to purchase alongside someone who is in full-time employment.

If you want to buy alongside someone else, fluctuations in your income level will be less vital. Nonetheless, you will still need to show stable earnings. If you cannot, you might be better off obtaining a guarantor mortgage (where someone else agrees to cover your mortgage payments if you cannot).

If you have a guarantor, your chances of getting approved for a mortgage will increase, and you may be eligible to borrow more than you could on your own. In addition, you may even qualify for a lower interest rate.

But with this type of mortgage, your lender secures your mortgage against your guarantor’s home. In other words, this gives them the right to reclaim your guarantor’s home if your mortgage is unpaid.

Can Freelancers Get a Buy-to-Let (BTL) Mortgage?

A buy-to-let mortgage is a loan used to buy or remortgage a property rented out to tenants and not lived in by the mortgage applicant. Obtaining a BTL mortgage as a freelancer can be more challenging, but it is still possible. Many lenders have a minimum income requirement of £15,000 to more than £25,000. 

For freelancers with variable incomes, proving these figures can be more difficult. Thankfully, some specialised lenders can consider freelancers regardless of their income level. But, you would have to own your main home, and the buy-to-let property’s rental income would have to cover at least the mortgage repayment cost.

If you do not already own your main home, lenders might be worried and assume you are applying for a BTL mortgage to buy a property you will live in. In this case, your mortgage lender is unlikely to approve your application.

Can I Secure a Mortgage If I Work Full-time with a Part-time Freelance Income?

Yes, lenders will consider it additional income. Generally, lenders will want to see tax returns to prove it is consistent. Additionally, if you are doing it contractually, they will typically use the average of the last two years’ income. If you do not have enough proof that you have been doing it for a long enough time, they may not accept it.

The bank wants to be confident that you will continue working in this field. To be eligible for a mortgage with freelance income, you have to prove consistency.

Do Mortgages for Freelancers Differ from Regular Mortgages?

Mortgages for applicants who are employed and those who work as freelancers are similar. No particular mortgage deals exist for freelancers. The only difference between an employed applicant and an applicant who works as a freelancer is how mortgage lenders assess their applications.

How Can I Improve my Chances of Securing a Mortgage as a Freelancer?

Here are some strategies to boost your chances of getting your mortgage application approved:

#1. Avoiding Big Gaps in Your Income 

Working whenever you want is one of the benefits of freelancing, but this might cause problems when applying for a mortgage. Lenders prefer to see stability in your earnings. Therefore, avoid having significant gaps in your income for at least a year before applying for a mortgage. But if any gap exists, provide a detailed explanation for it.

Furthermore, there are some ways you can avoid significant gaps in your income as a freelancer. You can achieve this with a strong online presence, creating good pitches, and working with multiple clients. 

Do not depend solely on one big client because they can fail or move elsewhere, leaving you in the lurch. Finding a new client may take a long time, which might result in a sizable gap in income.

#2. Maintaining a Good Credit Score 

Raising your credit score is another way to boost your chances of getting your mortgage application approved. Mortgage lenders want proof that you are responsible regarding debt repayment. A way to prove to them that you are is to have a good credit record.

As a freelancer, it is not impossible to overcome lower credit scores. But try to maintain a good credit history if possible. You can improve your credit score in many ways. Ensuring you are making payments on time is one of them. Late payments can affect your credit score negatively, so staying current on all your bills is vital.

Also, try to pay down your existing debt. Since high debt levels can lower your credit score, reducing debt can help raise your credit score. Additionally, ensuring you are registered on the electoral roll (registering to vote) is another vital tip in raising your credit score. 

You can check out our Hot Tips to improve your credit score guide to learn more ways to increase your credit score.

#3. Accepting Long-term and Recurring Business

The biggest obstacle preventing freelancers from obtaining a mortgage is an unstable income. Thus, proving that you have long-term contracts or had repeat business can boost your chances of getting your mortgage approved.

Aim to provide as much proof as possible that your business is doing well by providing more documentation than the lender specifically asks for. Here is where your Mortgage expert comes in. They can help you do this. 

#4. Be Prepared

Another way to boost your chances of getting your mortgage approved is to ensure you understand how the lender will calculate your income. It will help determine how much you can borrow and hasten the application process.

#5. Increasing the Amount of Your Deposit

Making a larger down payment means making a bigger commitment and requires less borrowing. The bigger your down payment, the better, given that it lowers the lender’s risk of offering a loan to you. Also, by increasing the amount of your deposit, you could buy a less expensive property for a lower loan-to-value (LTV).

#6. Avoid Taking on New Debts Before Mortgage Completion

Lenders may view you as a risky investment if you take on new debt while waiting for your mortgage to be approved. No matter what the purpose of the debt is, lenders may reject your application if you take out something of monetary value on credit while you wait for what may be your massive loan application.

Upon receiving your application, your lender will run a credit check on you or anybody you are buying the house with and determine the maximum amount to loan you. However, the lender can perform another credit check until your purchase is complete.

#7. Working with a Certified Accountant

Lenders prefer it when a certified accountant prepares your accounts because it indicates stability. By working with an experienced certified accountant, you will have solid, credible records to present mortgage lenders with.

It is also vital to note that a competent accountant can advise you on how to lower your tax without drastically lowering your taxable income. Reducing your taxable income this way can harm your income figures for a mortgage application. Consequently, this will affect your ability to secure a mortgage.

#8. Speaking to a Specialist Mortgage Broker First 

As a freelancer, it is advisable to first speak with a specialist mortgage broker when applying for a mortgage. A specialist broker can assess your unique circumstances and explain your options.

Also, a specialist broker possesses market knowledge and can access a variety of mortgages that you might not be able to find on your own. They also know which lenders would be best for you and how to boost your chances of getting your mortgage approved.

Start your Freelancer Mortgage Approval Process Now!

Getting a mortgage as a freelancer is not impossible, but it can be challenging. However, working with a specialist broker like us will make the process seamless.

We are a highly trained specialist broker ready to guide you throughout the application process and offer much-needed assistance in your quest for a freelancer mortgage. Contact us right now, and let’s help you secure that mortgage.

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Luca Bertolino

Mortgage Expert

Your Mortgage Experts is led by Luca Bertolino with 20 years experience in financial services and in the property market. Through Luca’s wealth of knowledge and expertise, Your Mortgage Experts have become a trusted adviser that clients have come to rely upon for all their mortgage and protection needs.

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