Freelance mortgage

There are now lots of freelancers in the UK since the recession and with the rise of the gig economy more self-employed workers.

Mortgage lenders have rightfully reacted to this and now have products to fit different types of workers.

Freelance mortgages are one of these products.

Can you get a mortgage if you are a freelance?

Getting a mortgage as a freelancer is certainly possible although proving your income to a mortgage lender may be complex. Freelance mortgages will generally fall under self-employed mortgages and these are a niche area of the mortgage market where self-employed mortgage brokers may be able to assist you better.

Freelance mortgages will be the same rates as any other residential mortgage rates so don’t be dissuaded by the name. The term “freelance mortgage” just reflects the speciality of the product for most mortgage lenders.

Due to the fact that your freelance income may fluctuate from job to job, mortgage lenders will find it hard to decide what your actual monthly disposable income is.

How can I prove my income for a freelance mortgage?

The freelance mortgage lender will likely want to see at least 3 years worth of accounts prepared by a chartered accountant.

Some mortgage lenders may accept less than 3 years but this will likely be at a non-competitive APR

What will help you get a freelance mortgage?

The things that may help you get a freelance mortgage include:

  • Long term clients: Long term clients will show the mortgage lender that you have returning business and an almost guaranteed level of income based on some key clients. Whilst your long term clients may not make up all of your income they will prove to the lender that there is some stability within your income.
  • A fixed daily rate: A fixed daily rate over a long period of time will prove to the mortgage lender that your income has some degree of certainty and they can, therefore, use your fixed daily rate to predict future income.
  • Your CV: Some mortgage lenders may request to see your freelance CV and portfolio to get an understanding of your quality of work and if your work is focussed on one core skill you have.

Eligibility and requirements of a freelance mortgage:

  • Three years of trading: Most mortgage lenders will require at least three years minimum of trading before they will consider a freelance mortgage. This gives them enough time to analyse the trends in your income and measure how much risk you may pose to them as a freelance mortgage borrower. There are mortgage lenders that will consider less than three years worth of accounts and even mortgage lenders that will consider less than 12 months worth of accounts.
  • Your mortgage deposit: Most freelance mortgages may require more than the standard 5% mortgage as the mortgage lender will look to reduce the amount of risk they are taking by lending to you. This means the mortgage lender will offer you a smaller loan to value.
  • Income gaps: If there are long gaps between when you earn your income, maybe because you took a break then this could go against you as mortgage lenders may see it as a period where you couldn’t find any work. Some mortgage lenders may consider a gap in employment as 1 week and others may consider it as 4 weeks. You will have to speak to your mortgage broker and advise them that you have had many gaps in employment so they can take this into consideration when looking for a freelance mortgage for you.
  • An up to date CV: as mentioned before, some mortgage lenders will look at your CV to try and get an understanding of your work as a freelancer and how this could affect the stability of your income.

Many freelancers will find themselves earning more than they expected on some months or much more than their average monthly earnings on some months. You may want to find a freelance mortgage which allows you to make overpayments on your mortgage without any penalty.

This will mean you cut down the amount of interest you may be paying on your freelance mortgage over its lifetime

Can I get a freelance mortgage with bad credit?

Getting a freelance mortgage with bad credit will be much harder. You may be better off [building credit]( looking to get a freelance mortgage.

Although there may be some mortgage lenders willing to offer you a freelance mortgage with bad credit, this will likely be at a non-competitive APR and you may still need a bigger mortgage deposit.

Bad credit could include:

  • A CCJ
  • An IVA
  • A debt management plan
  • A default
  • A bankruptcy
  • A home reposession

Government home buying schemes for freelancers

You may be able to get some home buying government schemes for first-time buyers and home movers which could increase your mortgage deposit or reduce the total cost of purchasing the property.

They are:

  • Lifetime ISA- gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
  • Help to buy ISA- gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. [Lifetime ISA vs Help to buy ISA.](
  • Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
  • Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
  • Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
  • Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
  • Right to buy- allows you to buy your home at a discount price.
  • Preserved right to buy– same as above.
  • Right to acquire- same as above.

You may also be able to use a host of mortgages with the help of your family.

They are a certain type of mortgage known as a family springboard mortgage, they include mortgages from lenders such as the Barclays family springboard mortgage, the lloyds lend a hand mortgage or the post office family link mortgage.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.