Are Mortgages for Freelancers and Self-Employed People Different to Regular Mortgages?
If you’re self-employed or freelancing, the mortgages available to you are exactly the same as the ones for employed people. You won’t find specific mortgages for self-employed individuals. The only difference is in how lenders assess your application and what proof they require.
Freelancers or self-employed people can often have income that fluctuates and changes from month to month. It’s this variance in income that can cause lenders to query or ask for more detailed information and assurances about affordability.
How to Get a Mortgage When Self-Employed or Freelancing
Getting a mortgage when self-employed or freelancing is possible, as long as you meet the lender’s criteria. In fact, getting a mortgage when you’re self-employed isn’t that different from getting one when you’re employed. You have access to the same mortgages and lenders as an employed person. You won't necessarily need specialist, "self-employed mortgage lenders” as you just need to provide a standard mortgage lender with different information about your income so they can determine how much you can borrow.
See the sections Documentation Required for Freelancer and Self-Employed Mortgages or Income Proving for Freelancer and Self-Employed Mortgages below for information on the documents and proof you need to provide. Remember, you may need to discuss non-standard construction mortgages with your mortgage broker if you have special circumstances.
Types of Freelance and Self-Employed Workers Eligible for Mortgages
Many types of self-employed and freelance workers are eligible for mortgages, from graphic designers, writers and artists, to builders, plumbers and hairdressers. Whatever your job, as long as you earn enough income and can provide assurances of affordability to a lender, a freelance career shouldn’t be a barrier to a mortgage.
You can also get a mortgage as a limited company director, but lenders may assess your income differently from sole traders. Find out more on our page Mortgages for Company Directors.
Factors Affecting Mortgage Approval for Freelancers and Self-Employed Individuals
Your own personal circumstances and various factors can affect whether you’ll be approved for a mortgage for self-employed people:
- Your credit history - a good credit history shows you’re responsible with your money and makes you less risky in lenders’ eyes
- Size of deposit - the larger your deposit, the less you’ll need to borrow against the value of the property. This lowers your LTV (loan-to-value) ratio and makes it more likely you'll be able to secure a mortgage at competitive rates
- DTI (debt-to-income) ratio - the fewer debts you have, the lower your DTI will be. To mortgage lenders, this tends to reduce how risky you seem as a borrower and improves affordability, allowing you to borrow nearer your potential maximum borrowing
- Your mortgage provider - different mortgage providers will have their own criteria and ways of determining your affordability. Don’t be disheartened or assume that because one provider doesn’t approve you for a mortgage, nobody else will. Many high street and specialist providers understand more nuanced situations or complex income structures and are happy to lend to freelancers and self-employed people
Proving Income for Self-Employed Mortgages, Freelancers and Business Owners
In general, self-employed mortgage requirements dictate that you provide the lender with:
- Evidence of at least 1 year’s trading
- At least 1 year’s accounts that have been submitted to HMRC
- The least 3 months of bank statements - some lenders may require this in order to ascertain whether your current trading is in line with previous years
Self-employed professionals, freelancers, or business owners can receive income in different ways, which can make a difference in what information or documentation is needed to prove your income.
Depending on how your business is structured, you might need to provide different verifications. For example, sole traders need to return an annual SA302 form to HMRC.
Documentation Required for Freelancer and Self-Employed Mortgages
If you're self-employed or freelancing, you'll need:
- Last 1 – 3 years of accounts
- Last 1 – 3 years of tax calculations and tax summaries
- Proof of ID and address
- Last 3 months of bank statements - not all lenders will require this
If you don’t have your tax returns, or your tax return is insufficient, mortgage lenders might ask for additional documentation to demonstrate your income. This can include bank statements covering months to years, invoices that demonstrate previous and ongoing work and client contracts that can provide proof of a steady income.
How Is Self-Employment Income Calculated for a Mortgage?
For self-employed and freelancer mortgages, income can be assessed in a few different ways depending on the lender.
For sole traders, lenders will look at your average net profit before tax from the most recent 2 years. Some lenders can also look at just 1 year’s accounts and others can look at 1 year’s accounts as a reference and forecast future earnings.
Lenders assess income differently for limited company director mortgages. They look at your salary and dividends over the past 2 years and some can use forecasts to determine your maximum borrowing.
Expert Tip - Nick Mendes, John Charcol. June 2023
Lenders are still looking for stability in terms of income and minimal breaks between contracts. But some lenders are relaxing rules in some professions. We're seeing certain lenders taking a more modern view of the gig economy and we expect this market to grow in the coming years. Having a track record of at least 12 months and bank statements to support this is still important.
Getting a Mortgage as a Freelancer with Fluctuating Income
A fluctuating income isn’t a total barrier to securing a mortgage for freelancers, but it can raise concerns for mortgage lenders on the stability of your income and how comfortably you’ll be able to consistently afford your repayments. Being able to show lenders that your income is stable and likely to continue, or even grow, is important for securing a mortgage.
Some mortgage providers won’t lend to freelancers with fluctuating monthly income, while others will look at your average income across the year.
Advantages of Freelance and Self-Employed Mortgages
Although it can seem like there are many extra hoops you need to jump through, self-employed and freelancer mortgages can have some advantages, such as these:
- Lenders can forecast and use your projected income - although that might mean extra paperwork, it can also mean you get a favourable rate compared to an employed applicant, who would be judged solely on their current income
- More tailored approach - because of the more complex process of assessing freelance and self-employed income and affordability, lenders tend to use trained underwriters who deal specifically with these types of applications. They have specialist knowledge of how self-employed income works and can tailor a loan to your individual circumstances. A mortgage broker like John Charcol will be able to find you a lender that can cater to self-employed applicants
Disadvantages of Freelance and Self-Employed Mortgages
The main disadvantages of self-employed and freelancer mortgages are:.
- Additional paperwork - you’ll likely need to provide more detailed evidence of your income with your mortgage application
- Variable income - it’s common as a freelancer to have peaks and dips in your monthly income, and not all lenders will have the same approach when it comes to assessing this. To ensure you use the right lender that can get you the best deal, speak to a mortgage broker
Tips for Securing a Home Loan as a Freelancer or Self-Employed Worker
To give yourself the best chance of securing a competitive self-employed mortgage, follow our top tips.
- Avoid gaps in your contracts and try to keep your income as consistent throughout the year as possible
- Have the right paperwork in place. Keep your accounts, bank statements, invoices, and contracts in good order and have them ready for your mortgage application
- Check your credit score and make sure your credit report is as good as it can be. If there are errors in your credit report, make sure you dispute and try to correct these. If you have issues affecting your credit, such as existing debts, try to reduce or pay these off to improve your credit profile
- Save a larger deposit so your LTV is lower
- Seek support and self-employed mortgage advice from a mortgage adviser at a broker like John Charcol, who can access a wide range of self-employed and freelancer mortgages
Options to Consider when Applying for a Mortgage as a Freelancer or Self-Employed Worker
Most self-employed and freelance workers have unique circumstances that call for a more tailored approach. When thinking about how to get a mortgage when self-employed, consider the different options open to you. This might include weighing up fixed and variable interest rates, saving a bigger deposit, or exploring different mortgage setups. These can affect your chances of getting approved and the maximum loan value you can achieve.
It’s a good idea to speak to an expert mortgage broker for self-employed people like John Charcol, who can assess your situation, advise you on your next steps and ultimately find the best mortgages for self-employed workers.
Use Our Self-Employed Mortgage Calculator
Use our self-employed and freelancer mortgages calculator for an estimate of how much you could borrow as a freelancer or self-employed person.
Compare the Best Mortgages for Self-Employed People
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How Can a Mortgage Broker like John Charcol Help?
We Take Care of Every Detail
We know your time is valuable when you’re self-employed. That’s why we take care of everything for you.
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However complex your income structure, we can help. Plus, we work around your schedule with in-person or remote consultations.
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Process for Buying a House When Self-Employed
1. First Conversation with Adviser
When you phone us, you can either arrange a phone appointment with your adviser or a face-to-face meeting – whatever suits you. Your adviser will ask you some questions then go away and find you the best deal for your circumstances and future needs. They’ll organise a follow up during which they’ll present you with what they’ve found.
2. Decision in Principle
Once you’re happy with their recommendation, they’ll go about securing your DIP (Decision in Principle) - which is basically a promise from the lender that they’ll loan you money on the condition that the information you’ve provided is correct and subject to a valuation of the property. Find out more about applying for a mortgage.
3. Offer on Property
After you’ve secured a DIP, you’ll be in a great position to make an offer on a property. Sellers like DIPs. They show you can afford the purchase. What’s more, the fact that you’ve already started preparing for the transaction highlights to them that you’re serious in your intention to buy.
4. Pre-Application and Submission
Following the acceptance of your offer, we’ll send you some information which explains all the documents we need to submit to the lender. You’ll be assigned a client relationship manager who’ll check and submit certified copies of your documents; they’ll liaise with both you and the lender. Your adviser will then submit the fully packaged self-employed and/or freelancer mortgage application.
5. Lender Underwriting and Valuation
The lender will underwrite your application; this basically means they’ll verify that the information you’ve provided is correct and review all your documents for themselves. They’ll also instruct a mortgage valuation on the property you want to buy to make sure there are no significant problems with the property and that it’s worth the amount you want to borrow.
6. Mortgage Offer
If the lender is happy with everything they’ve found, they’ll send you a mortgage offer. They’ll also send us a copy.
After you’ve accepted your mortgage offer, you’ll go through the legal part of the process, known as conveyancing. This is where the solicitors/conveyancers draw up contracts and organise the actual, legal purchase of the property. You’ll also need to arrange buildings insurance at this stage, making sure it’s in place from exchange. Find out more about when you need a mortgage conveyancing solicitor.
8. Exchange and Completion
Once everything is in place, your conveyancer/solicitor will exchange contracts with the seller’s conveyancer/solicitor. If your deposit is coming from savings or a gift, then it’s at this point that you put the deposit down and are legally bound to the property. You’ll lose your deposit if you pull out after exchange.
The purchase completes when the money is transferred on an agreed-upon date. This is when you get the keys to your new home. If your deposit is coming from the sale of your current property, then it’s transferred at completion as part of the whole purchase.
Applying for a Mortgage
Applying for a mortgage couldn’t be simpler with our easy and simple guide from application to accepting your offer.
How Much Can I Borrow?
This mortgage calculator examines your income and works out how much money a mortgage lender might provide you with
On this page you’ll find our detailed mortgage terminology glossary. There’s a lot of jargon out there but we’re here to make it easy.
FAQs on Freelance and Self-Employed Mortgages
Can I Get a Mortgage if I Am a Freelancer?
Yes, you can get a mortgage as a freelancer. You will normally have to provide more detailed income information and documentation, such as 1 to 3 years of tax returns, invoices, contracts, or bank statements covering a longer time period compared to employed applicants. However, as long as you meet the lender’s criteria, you should have no problem securing a freelance mortgage at a competitive rate.
Can I Get a Mortgage If I Am Employed and Self-Employed?
Yes, it's possible to get a mortgage with a mixture of employment types, but it's a little more complicated. Your employed and self-employed incomes are assessed separately and will both have an income multiple applied to evaluate your maximum loan value.
Generally, most lenders expect you to have been self-employed for at least 2 years to count your self-employed income. The main issue a mortgage provider will assess is whether your combination of employment types has been consistent and is likely to remain so in future, and how this affects your affordability.
How Long Do I Need to Have Been Freelancing Before I Can Apply for a Mortgage?
The minimum amount of time that lenders will expect you to have been freelancing is at least a year, but you’ll have more lenders available to you if you’ve been freelancing for 2 or 3 years. The longer you've been freelancing and the more proof you have of a steady income, the more likely you are to be approved for a freelance mortgage.
How Long Do I Have to Be Self-Employed Before I Can Get a Mortgage?
Normally, you need to be self-employed for at least a year to qualify for a mortgage but they’ll more lenders able to consider you if you’ve been self-employed for at least 2 or 3 years. As with freelancing, the longer you've been self-employed and can show a regular, stable income, the more likely you are to be approved for a mortgage.
How Much Can I Borrow as a Freelancer?
As a freelancer, your income will normally vary from month to month and possibly year to year. This makes determining how much you can afford to borrow more difficult compared to employed individuals with a specified monthly and annual income.
Most mortgage providers will use the last 2 - 3 years’ net income to work out your maximum loan value. They may also look at your contracts or use your day rate in calculations.
Most lenders will work out your affordability as a multiple of your average annual salary. The maximum loan value you’ll be approved for is typically at least 3x your average annual earnings but can be up to 5x or 6x depending on your circumstances and the lender.
What Proof of Income Do I Need as a Freelancer?
You’ll normally need your last 1 - 3 years of accounts, tax calculations and summaries. You’ll also typically be asked to provide your credit report and the past 3 months of bank statements. Depending on your work structure, you’ll either need an SA302 tax return, or your accounts signed off by a qualified accountant to apply for freelance mortgages.
If you don’t have tax returns, you may be able to use alternative documentation, such as several months or years of bank statements, invoices or client contracts, to demonstrate your income stream.
Can I Get a Mortgage With One Year’s Accounts?
It's possible to get a mortgage with only 1 year’s worth of accounts, but it will limit the lenders available to you as most lenders generally use the past 2 years of net profits before tax to calculate what to lend to you.
Some mortgage providers may be willing to accept other documentation as proof of income, such as contracts or invoices. However, this will depend on the flexibility of specific lenders and their self-employed mortgage requirements.
Can I Get a Self-Employed Remortgage?
When you remortgage, you take out a new mortgage with a new lender. So, you’ll be able to remortgage onto a new product even if you were employed when you took out your first mortgage.
You should start to look at the self-employed mortgages available to you at least 3 months before your current mortgage comes to an end. It’s possible your current mortgage provider may not be able to approve you for a mortgage if the criteria and affordability checks they use don’t align with your situation. Be prepared to provide more detailed information on your self-employed income, and to shop around for different lenders and mortgage deals.
Learn about remortgaging on a part-time contract while self-employed here.
How Do Self-Employed People Get Multiple Mortgages?
Self-employed people can apply for multiple mortgages in much the same way as employed people. As with any self-employed mortgage, the key difference is the information that you’ll be required to provide and how lenders assess your risk level and affordability.
Why Is a Mortgage So Hard to Get for a Self-Employed Person?
The flexibility of self-employed work tends to mean your income fluctuates. This can make it more difficult for lenders to assess your finances and how much you can afford. Self-employed people therefore have to provide different information which can make the process a little more complex but not necessarily harder.
There are plenty of high street and specialist providers who understand the nature of freelance, contract or self-employed work and are happy to lend to self-employed individuals. Using an experienced self-employed mortgage adviser can be a good way of making sure you have access to the right lenders and mortgage products.
Do I Need a Specialist, Self-Employed Mortgage Broker or Self-Employed Mortgage Adviser?
You don’t need a mortgage broker or adviser that only specialises in helping the self-employed, as self-employed people have access to the same mortgages as employed people. Nonetheless, our advisers at John Charcol have loads of experience helping self-employed people secure standard and specialist mortgages. We know what information the lender needs from you and can guide you through it all, step by step.
What Are the Best Mortgage Lenders for the Self-Employed?
The best mortgage lender for you will depend on your situation, self-employment aside. Nonetheless, some lenders may require only 1 year of accounts and tax returns, which may suit you better if you haven’t been self-employed for a particularly long time. We’ll base our recommendation on your individual circumstances and find you the most suitable lender and cheapest product.
What Are the Average Mortgage Rates for Self-Employed People?
As self-employed mortgages are the same mortgages that are available to employed people, the rates offered are also the same. Residential mortgage rates typically range from 4% - 6% (06/2023).