Freelance mortgage guide

Do you think that being self-employed means that you’re automatically out of the running to get on the property ladder? We’re here to help because it’s not the case.

The number of self-employed workers has increased from 3.3 million people in 2001 to 4.8 million in 2017¹ but a third² of self-employed people actually think that mortgage lenders are biased against them. If you work for yourself you are just as entitled to the same rates as people that have a ‘typical’ employer, you just have to be able to prove your earnings.

You need to be able to supply enough information about your income for potential lenders to assess your affordability and whether you will be able to sustain your level of earnings. Unfortunately, as a self-employed applicant you will have to provide significantly more paperwork for the lender to prove your income but, it’s definitely possible for you to get on the property ladder. It’s also possible if you are a first time buyer and also self-employed - a supposed double whammy in the difficulty stakes!

Even if you’re self-employed and buying alone then you may think that there’s an even smaller chance of securing a mortgage but the same conditions apply as to whether you’re self-employed, single or both. It’s simply down to affordability. Read our can you buy a property on a single income? blog post for more on this.

Here are five things that you’ll need to improve your mortgage application chances.

1. Demonstrate earnings and evidence of regular work

You’ll usually need to demonstrate two years of earnings, be this accounts or SA302 tax calculations. Three years is often recommended as the optimum amount but sometimes lenders will accept one or two if you have a strong future forecast for your business.

2. HMRC records

Both your income and the tax that you’ve paid. Jessica Berry, a freelance social media manager from Nottingham recommends sorting your tax return as soon as the new tax year rolls around to increase the ease of your mortgage application. She says, “As soon as I had the paperwork from filing my tax return I was able to pass it on to my mortgage advisor who could then use it as evidence when applying for the mortgage. It’s in your interest to get it filed as soon as possible so that the process can start moving so ditch the procrastination and get proactive!” as part of her top 5 tips for buying a house when you’re self-employed.

3. A strong credit rating
Pay off any outstanding smaller loans or credit card payments if you can and use credit-checking apps such as MoneySupermarket’s Credit Monitor to get recommendations on how to improve your rating before you apply for your mortgage. 
Having a clear credit history for both yourself and your business if you are a registered sole-trader will help you with your mortgage application.

4. Advice from an independent mortgage adviser

If you have only recently become self-employed then it won’t be impossible for you to get a mortgage. Nottingham Mortgage Services are an independent broker service that searches over 60 lenders and thousands of mortgages in order to find one that will comfortably fit your circumstances. If you are already a savings customer of The Nottingham and have held an account for 12 months or longer with £500 or more in it then you will qualify for our loyalty scheme, Member Rewards, and the usual up to £299 fee for Nottingham Mortgage Services will be waived.

5. Deposit savings

Having a solid deposit is essential for any mortgage application, regardless of whether you are self-employed or not. You will need between 5-20% and having a higher deposit can mean that you will have access to a wider range of mortgage products and lenders. If you are finding it tricky to save a deposit and are aged 18-39, a Lifetime ISA could be a way to fast-track your savings. This Government scheme means that for every £1 you deposit into your tax-free savings account, you get a 25% bonus - up to a maximum of £1,000 in bonus payments per year.

The maximum amount you can save in a Lifetime ISA each year is £4,000 and you can open an account with just £10. The Lifetime ISA is an account that you can only use the savings for a first home or for retirement, but you can keep the account open after you’ve used it to buy your first home and continue to reap the rewards of the bonus until you are retired and can withdraw the funds.

From a recent press release, we laid out an example of first time buyer Lifetime ISA savings: 

‘An individual saving to buy their first home of £184,000³ (UK average) would need to save a 10% deposit of £18,400. After saving the maximum annual amount of £4,000 for four years a customer would have a balance of over £20,000 in their LISA – sufficient to buy their home. If they saved the same into the markets best online instant access account (currently paying 1.4%) they would only have just over £16,000 at that same point and have to continue saving for a further year to reach £20,000.’

Our research has shown that 17% of The Nottingham members are choosing our award-winning Lifetime ISA over the Help to Buy: ISA. The latter account is being withdrawn by the Government at the end of November 2019 and will no longer be available to new applicants.

Remember, your home may be repossessed if you do not keep up repayments on your mortgage.

Whole of market mortgage advice is provided by Nottingham Mortgage Services Ltd (NMS); an appointed representative of Quilter Mortgage Planning Ltd, which is authorised and regulated by the Financial Conduct Authority; registered No. 440718. NMS is a wholly owned subsidiary of Nottingham Building Society and registered in England and Wales, No. 03089887; Nottingham House, 3 Fulforth Street, Nottingham NG1 3DL.

If Nottingham Mortgage Services find you the right mortgage there may be a one-off fee payable when we submit your mortgage application. You will be charged a fee of £299 (non-members), £149 (new Nottingham Building Society savings customers or previous customers of Nottingham Mortgage Services) or free for building society members who have held a minimum of £500 in one of our savings account for at least 12 months. If you pay for our service and for any reason you don’t complete on your mortgage, we will refund the amount you paid minus a £99 application fee.

The maximum you can save in a Lifetime ISA each tax year is £4,000. The Government will pay a 25% bonus of up to £1,000 each tax year. You can withdraw money from a Lifetime ISA to buy your first home, or at age 60. Any other withdrawals made from your Lifetime ISA will incur a 25% Government withdrawal charge which means you could get back less than you paid in. Full terms and conditions are available at Nottingham Building Society, Nottingham House, 3 Fulforth Street, Nottingham NG1 3DL.

¹ ONS Employment and Labour Market Statistics

² 1/3rd of people think lenders are biased against self-employed people: The Guardian

³ UK and regional FTB property prices are from Nationwide HPI data, July 2018.

The Nottingham was awarded Best Lifetime ISA Provider in the 2019 Moneynet Awards


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