How to obtain a mortgage as a freelancer

Applying for a mortgage can be a stressful process, with many applicants worrying about whether or not they’ll be approved. The process is often seen as more complex for those who aren’t in fixed employment. 

These days, this does not need to be such a concern. With many people leaving their traditional ‘nine to five’ job structure to become self employed, lenders are becoming familiar with freelancers and are more frequently lending to those under that umbrella. 

Freelance work can be complicated to define, often falling under a variety of business structures. Specific mortgage products built for the self employed are offered by many lenders, but these may not be the ideal solution for every situation. Even if a lender doesn’t offer a self employed mortgage product, they may well allow freelancers access to standard mortgage products if certain criteria are met. 

Being self employed doesn’t necessarily limit an individual’s ability to obtain a mortgage, however it can make the process slightly more complex and it may be necessary to provide additional evidence that proves affordability and the ability to meet repayments. 

Not all banks and building societies will work with freelancers, so it is important to research and approach a suitable lender. It is often beneficial to approach a specialist or smaller lender, as they may be more likely to take a personal approach to the underwriting process, reviewing each application individually rather than relying on a computer algorithm to make decisions. 

Gathering supporting evidence

Traditional employment allows individuals to prove their earnings to a lender through the provision of payslips, in turn reassuring the lender that their earnings are stable. Unfortunately, this isn’t an option for freelance workers who don’t receive a regular payslip from a company.

Before approaching a potential mortgage lender, freelancers should make sure that they have evidence of contracts, company accounts and any self-assessment tax forms (SA302s). Ensuring that all work and contracting histories provided are kept current and up to date is advisable. It can also be beneficial to make sure any online profiles, such as LinkedIn, are updated as this can provide extra reassurance to a lender.

Alongside any additional paperwork needed, freelance workers aren’t exempt from the usual checks lenders will carry out and therefore must prepare accordingly. Alongside the supporting evidence suggested above, freelancers may wish to check their credit reports are in order, ensuring that everything is up to date and there are no outstanding payments to their name, or County Court Judgements (CCJs) as these can heavily discourage lenders.

It may also be beneficial to use an independent mortgage intermediary who can guide freelancers through the process. An experienced broker will have most likely dealt with similar applications in the past and can therefore help the experience run as quickly and smoothly as possible for both parties.

We have compiled a list of tips that help cover a wide variety of the elements involved in getting a mortgage as a freelancer:

​​Considerations for all freelancers:

1. Many people, but especially freelancers, gravitate to their bank to obtain a mortgage in the belief that their bank will understand their finances and will be more likely to lend. This is not necessarily the case, especially for freelancers whose finances may be more complex than an average mortgage applicant’s. Finding a specialist mortgage lender who can understand your business could give a much higher chance of a successful application.
2. Lenders will understand that different industries make payments in different ways i.e. a videographer may be paid at the end of a project, whereas a marketing consultant may invoice once a month. As long as the freelancer is being paid in what is considered a ‘normal’ way for that industry, and the payment schedule can be evidenced, lenders tend to take a favourable view.
3. There is generally no minimum age for freelancers to apply for a residential mortgage, whereas buy to let mortgages often have a minimum age of 21, 25, or even 30. If someone has a proven history and deposit, their age should not hold their application back.
4. Similarly, there is no legal maximum age limit for freelancers to apply for a mortgage, but lenders will set their own criteria.
5. If freelancing is a side hustle (as opposed to an individual’s main source of income) most lenders’ standard position is to use 50% of their freelancing income in affordability calculations and the individual should be prepared to provide tax returns as evidence that this income is sustainable.

For freelancers running a limited company:

1. Two years of company accounts are usually required for freelancers running their own business – some lenders may consider less.
2. Make sure company accounts are filed on time – late filing could ring alarm bells with the lender.
3. Different lenders will have different affordability criteria and may base their mortgage offer on salary and dividend, net profit or retained profit. It is worth speaking to an accountant to properly understand the relevant figures before applying for a mortgage.
4. If a freelancer has switched their business model from sole trader to limited company but doesn’t have two years’ worth of accounts, the lender may take a favourable view if the individual is based in a similar industry or sector.
5. Some lenders will take the average of two years’ accounts, others will base their lending decision on the worst year – whether that be year one or two. Freelancers who have had a particularly poor year (such as due to the impact of the Covid pandemic) but can explain why, could still be considered for a mortgage.
6. Freelancers who are concerned about having a poor year before applying for a mortgage can ask their accountant for an estimated projections letter to support their case.

For freelancers operating as a sole trader:

1. Two years of operating as a sole trader is usually the minimum required to apply for a mortgage. Some lenders will prefer more and some will accept less but two years is a good rule of thumb.
2. Keep all paperwork related to freelance work – from contracts, to bank statements, invoices and remittance notes as a lender may ask to see it.
3. It can be helpful, but not always essential, to have a separate bank account to keep track of business expenses and income away from personal finances. If not, be ready and able to clearly demonstrate the difference in personal and business funds.
4. Lenders may use a day rate calculation such as five times the value of daily contracts, multiplied by 46 or 48 weeks (to allow for some downtime/holiday etc). The SA302 form can be used as a way to calculate previous earnings based on submission to HMRC.
5. If the applicant’s freelance work is in the same sector as their previous employed job, then an application can sometimes be supported by evidence of PAYE income in the form of P60 forms.

For freelancers operating under an umbrella company:

1. There are mortgage providers like Suffolk Building Society who will lend to freelancers who use an umbrella company but it is usually worth considering engaging the services of a specialist mortgage broker, as the application can be more complex. Much of the guidance above still applies in terms of demonstrating clarity of earnings and stability of contracts.