This guide was last updated 19 September 2018
Applying for a mortgage feels daunting. Whether you’re a first-time buyer or you’re looking to remortgage, working out how to ensure you get the finance you need at the best possible rate can seem as complicated as negotiating a smooth exit from the European Union. And things only seem more difficult if you’re a freelancer without a permanent contract that can smooth the way to convincing an underwriter to approve the loan. But this needn’t be the case.
Professional mortgage brokers can help individuals with unique and specific needs to find the perfect home loan and here at Coreco we’re experts in arranging mortgages for freelancers or contractors, whatever your circumstances. We’ll keep you company at every stage of the mortgage journey, so you’ll never feel alone! (Not in a creepy way, though. We just mean we’ll always be there to support you). We’ll make sure that you know what you need to supply to us and when, and we’ll keep you updated as often as we can, so you can be sure that your application is making progress. And, unlike when you apply directly through a bank, we help you jump through the administrative hoops required to satisfy the underwriters.
Each lender is different. It sounds like a cliché, but it’s true. Knowing which ones to target and what they’ll need to approve an application is a fine art, but fortunately, it’s also one of our specialities. We know, for example, which lenders want to see that you’ve been continuously employed for a long period of time, which will only lend to experienced contractors, and which ones are open to applications from people new to freelancing. Going directly to a bank means you won’t be privy to this information when you start your application. It’s even possible that you won’t know that they don’t accept freelancer applications until you receive the rejection letter. That’s where mortgage brokers can save you time, stress and money.
Usually, mortgage providers who are comfortable with lending to less experienced freelancers will want to see evidence of continuous employment in one profession for more than two years, even if that work wasn’t on a full-time basis. These lenders will often also have a minimum day rate that you’ll need to hit to qualify for a loan.
Lenders look at this daily rate to work out how much they can lend you. A common process is to multiply your daily rate by five to get a weekly rate, and then multiply that figure again by a number between 46 and 48 to work out an annual ‘salary’, allowing for small gaps in employment throughout the year. But of course – and we’ll repeat it until we’re blue in the face – all lenders have different criteria so it really does pay to go with a broker who knows the ins and outs of each mortgage provider. As a rule of thumb, take a look at one of our online mortgage calculators to see how much you might be able to borrow.
In general, providers want to see evidence of your commitment to a profession. They’ll want you to demonstrate that your contracts have been renewed previously and that you have more than six months remaining on your contract. Although this requirement, and the need to earn a minimum daily rate, becomes much more relaxed once you hit two years of experience, when a whole new raft of lenders will open their doors.
An alternative option, once you’ve been working as a contractor or freelancer for a considerable length of time (usually more than two years), and assuming that you are responsible for your own tax return, is a self-employed mortgage. The vast majority of lenders are happy to offer mortgages to self-employed individuals, whether they’re operating as a sole trader or as a director of a limited company, so you may find your choice of deals drastically increases if you go down this route.
When assessing an application for a self-employed mortgage, lenders usually want to see two or three years’ worth of accounts. Different providers also look at different measures of income to work out how much they can lend you. Some will only take the net profit before tax figure, while others will use the director’s remuneration plus dividends and still others will look at profits and cash retained in the business. If that sounds like a lot of jargon, or just more administrative work than you were prepared for, then be sure to get in touch with a mortgage broker, who will be sensitive to your unique situation. At Coreco, we will review your business accounts and help you prepare exactly what you need for your application.
If you’re a freelancer looking for a mortgage, there’s no need to delay any further, particularly as the Bank of England has just raised interest rates. Don’t rely on a bank to understand the specifics of your situation, head over to our contact page and get in touch with one of our friendly mortgage brokers. We can help you find a mortgage deal as unique as you are.