How to Get a Mortgage as a Freelancer

Posted 16 Jul 15

Getting a mortgage used to be much easier.

A wage slip used to be enough to prove your income, however since the economic situation in Europe has sufficiently worsened, the lenders became more cautious in checking the applicants’ details to avoid any possibility of financial fraud.

Today it is not enough to be able to prove your income. You have to show that you can sustain mortgage payments alongside your day-to-day outgoings. This made it especially difficult for freelancers to apply for a mortgage, since their income might vary from month to month.

Even though as a freelancer you might have the same access to mortgage deals as regular employees, you will need to provide the potential lender with three years’ worth of accounts (if you are a limited company owner) or SA302s (the form that HMRC gives sole traders which proves your tax payments). Although those requirements might seem straightforward, there are many complications that can stand on your way to successful application.

The major difficulty in getting a mortgage comes from the range of ways in which you can set yourself up in self-employment. Contractors, sole traders, company directors can all be assessed in different ways.

If you are a company director and you leave the majority of your profit in the company account for tax deduction reasons, you might struggle to meet the mortgage criteria based on your wage and dividends.

Unfortunately, the situation gets even worse for the start up company directors. Many lenders will refuse to accept an application which shows less than three years accounts which is impossible for young businesses. It is extremely upsetting that some of the applicants might feel punished for starting up a successful business.

Fortunately, there are still options for freelancers. A lot of private lenders understand the difficulties first time business owners encounter and are happy to consider even those applicants who can only prove one year accounts. For some of the lenders it is not how much money you earn, but how stable your business is and if you are able to prove it, your application is more likely to be accepted.

In certain cases you might be requested to show your previous few P60s from your last employment and if your new business covers the same business area as the one you worked before, it increases your chances of getting a mortgage even more.

In order to make sure you’ve done everything to meet the lenders criteria, we advise you hire a professional and qualified accountant who will help you complete your accounts, as well as advise you on how you can better your credit score. It is crucial that you keep your accounts up-to-date and that your self-assessment always meets the required deadlines.

Based on this, your accountant will be able to complete an accountant’s certificate stating your earnings from the last two years. At Tawanda Accountants we take care of our client's accounts and make sure they benefit most from their situation.

If you would like to know how we can help you get closer to your mortgage, contact us today and we will make sure your experience is as easy and simple as it can be.

Although you should prepare yourself for some bumps when applying for mortgage as a freelancer, do not get discouraged! Starting your own business is a first big step towards financial independence and a full control over your life.

About Us

As a leading UK accounting firm and expert business consultancy, Tawanda Accountants carry out scrupulous accounting and provide payroll services and procedures for small businesses, individuals and business start ups.