How to get a mortgage when self-employed in the UK: a comprehensive guide

Author

Emma

Professional Development Specialist

While there are plenty of perks to enjoy as a self-employed professional, there can be challenges when it comes to buying a property. According to The Mortgage Lender, close to half (45%) of non-PAYE workers who have applied for a mortgage have had their application rejected.  

There are several factors that make mortgage applications tricky for independent consultants. From irregular income patterns to non-traditional employment structures. 

Thankfully, it’s not impossible to overcome these hurdles. This article will arm you with the information you need for a successful mortgage application as a freelancer. 

We will cover: 

• UK mortgage requirements
• Challenges faced by self-employed workers
• Practical advice and tips for mortgage approval 

Understanding mortgages for the self-employed

What counts as self-employment when applying for a mortgage?

You’re considered self-employed if you own a 20% share or more in a business that contributes to the majority of your income. 

You could be:

• A small business owner/sole trader 
• Partner
• Director 
• Contractor 

Can I get a mortgage as a self-employed professional?

There are misconceptions that being self-employed means mortgages are a no-go. The truth is, while it may call for a little more planning and paperwork, independent professionals can absolutely secure a mortgage.

There are some challenges to be aware of though. We will explore the key ones in the next section. 

Challenges self-employed professionals face

Proving stable income

Most consultants have a variable income with peaks and troughs throughout the year. This makes it tricky to provide a picture of financial stability to mortgage lenders. 

Limited track record

On top of inconsistent earnings, new freelancers may come under extra scrutiny due to a limited financial history. 

Higher risk perception by lenders

Fluctuations in income often mean a more cautious approach from lenders. They tend to view self-employment as higher risk when compared to a salaried employee. 

Complex documentation requirements

Lenders often request extensive paperwork from contractors applying for a mortgage. 

This includes: 

• Tax records
• Business accounts 
• Contracts (where applicable)
• Proof of income

Mortgage requirements for the self-employed

Now we’ve covered some of the challenges, let’s look at the specific mortgage requirements for independent professionals. 

Proof of income

Self-employed mortgage applicants usually have to provide 2-3 years of accounts. Plus an SA302 form or HMRC tax return. Lenders use these documents to assess your stability and consistency of earnings. 

Credit history

Your credit history is another thing lenders dig into to understand your repayment behaviour and reliability. Maintaining a good credit score is vital in helping you secure a mortgage with favourable terms. 

Deposit expectations

As independent consultants are seen as higher risk, it’s likely you will need a larger deposit to improve your chances of mortgage approval. 

Affordability assessment

Lenders will also run an affordability assessment to make sure you can comfortably repay your mortgage each month. 

They assess your average annual income first to work out the maximum mortgage they can lend you. Next, they check your income and outgoings to ensure you can afford your mortgage payments. This is a rigorous check that includes digging into: 

Income

• Self-employed earnings
• Benefits such as child and working tax credit
• Pension income
• Rent from a buy-to-let property

Outgoings

• Regular bills like council tax and utilities
• Phone contracts 
• Monthly debt repayments 
• Transport costs 
• Childcare 
• School fees
• Monthly food shopping bills 
• Socialising 
• Holidays
• Hobbies

Navigating mortgage requirements as an independent professional can feel  daunting. In the next section, we’ll look at some solutions to help you through the process. 

Solutions to overcome mortgage challenges

Prepare thorough documentation

To improve your chances of mortgage approval, it’s wise to have your books in order. Make sure your financial records are up to date, and tax returns are done in time. Be sure to have records of bank statements and business accounts up together too to show stability. 

Hire a mortgage broker

With so many boxes to tick, it’s a good idea to enlist the help of a specialist mortgage broker. Look for brokers who specialise in independent professionals. This will help you find the best mortgage rates for your self-employed status. 

Improve financial readiness

To make yourself a more attractive borrower, consider reducing outstanding debts, saving for a larger deposit, and improving your credit score. This goes a long way to show you are financially responsible and committed. 

Explore self-employed-specific mortgage products

There are a host of mortgage services and products tailored to freelancers and contractors. By tapping into them you’ll find guidance specific to you. Plus improve your chances of securing a mortgage. 

Practical tips for self-employed mortgage applicants

As we’ve outlined, mortgages are very attainable for independent professionals. That said, we recommend keeping these top tips in mind to help streamline the process and boost your chances of approval.  

Maintain clear financial records

Keeping on top of your bookkeeping and ensuring timely tax returns will help you greatly when it comes to a mortgage application. It will save you time, plus lenders appreciate organised financial records that show stability.  

Build a consistent work history

A consistent work history can make you a more attractive prospect when applying for a mortgage. Taking time to nurture long-term contracts or recurring clients could pay dividends further down the line. 

Plan for a larger deposit

If you can, set aside more savings to build a bigger deposit. By paying a larger chunk upfront you can reduce loan-to-value ratios. Plus enhance your chances of mortgage approval with better terms and rates. 

Seek an agreement in principle

Before you start your property search, it’s a good idea to seek mortgage pre-approval, also known as an agreement in principle (AiP). An AiP lets you know whether a lender would be willing, in principle, to offer you a mortgage and for what amount. It doesn’t involve a hard credit check, so it won’t affect your credit score. Moreover, it lets sellers know that you are a serious buyer. 

Alternatives to traditional mortgages

For freelancers and contractors with irregular income and non-traditional employment, there are alternative mortgage options available.

Let’s look at a few.   

Offset mortgage

Offset mortgages work by ‘offsetting’ your savings against your mortgage balance. This brings down the interest, and in turn, your monthly repayments. 

Joint applications

If you have a partner or spouse with a stable income, it’s worth considering a joint mortgage application. Lenders tend to look at the combined income of both applicants. This improves your chances of acing the affordability assessment and securing approval. 

Guarantor mortgages

If you’re self-employed and have limited financial history or a lower income, a guarantor mortgage is worth exploring. It means a family member or another trusted person acting as a guarantor. They offer their own property or savings as security for your mortgage. 

The Hightekers solution

For the ultimate solution, partnering with Hightekers can greatly enhance your chances of securing a mortgage as a contractor. Plus, you retain all the perks of your freelance flexibility. 

How does Hightekers work?

The Hightekers service for contractors means you benefit from permanent contract status and regular payments (while still finding your own clients). 

This makes you a lower risk for lenders and boosts your likelihood of securing a mortgage that suits your needs. It also means your payroll and taxes will be in order, because we handle it for you. 

Your path to homeownership

Securing a mortgage is an achievable goal if you’re self-employed, but it can be a bumpy ride! 

It’s essential to be well-prepared and have your paperwork in order. Setting aside funds for a larger deposit can greatly improve your chances. As can keeping your credit score in good shape. It’s an equally good idea to seek professional advice from a mortgage broker or financial advisor specialising in mortgages for contractors. 

Alternatively, the Hightekers service offers a seamless solution for self-employed professionals keen to get mortgage approval. By providing you with a permanent contract and regular payments, we lower your risk to lenders. What’s more we take the headache of financial records and tax returns off your desk. 

With Hightekers you can enjoy all the perks of freelancing and get one step closer to homeownership. 

Take advantage of employee-style benefits with Hightekers

Author

Emma

Professional Development Specialist

A seasoned career development specialist based in Bristol, where she helps international professionals manage the complexities of establishing their independent careers in the UK. With over a decade of experience in talent management and professional mobility, she leads initiatives to support freelancers and independent consultants across various high-skilled sectors. When she's not advising professionals on their career journeys, you might find Emma exploring Bristol's street art scene or cheering on her beloved Bristol City FC!