Working as a contractor or a freelancer offers a host of benefits. Flexible working, higher levels of take home pay and being able to pick and choose the work you do are among the best.
But there have historically been certain drawbacks – one of which is securing a mortgage.
Being your own boss also means you have to take the onus for certain things – one of which is proving you can afford to buy and sustain a mortgage.
This has been challenging for many over the years, which is one reason why we do what we do. At Roots Mortgages, our main aim is to provide contractor mortgage and freelancer mortgage advice. And one thing we hear time and again is around the challenges of convincing lenders you fit the bill as a suitable mortgage candidate.
There is however growing evidence that lenders are starting to take heed of modern working situations and increasingly offering affordable options to self-employed mortgage applicants. This is a real boon for those working as contractors and freelancers.
Why are self-employed mortgages complicated?
This ultimately boils down to self-employed workers, including contractors and freelancers, essentially being asked to jump through more hoops and provide more proof of their financial situation.
For ‘traditional’ workers, pay slips and bank statements can provide a pretty overarching view of their financial situation which is easily interpreted by lenders.
For self-employed workers however, this sense of clarity is harder to put across. While you may well know you can afford a certain mortgage, proving this to lenders often sees the self-employed being asked to provide more details, and struggling to get the mortgage they want in certain circumstances.
But are things changing?
Potentially, yes. Research from MTB Affordability has indicated that in 71% of cases in January 2021, at least one lender was available to meet the requirements of mortgage applicants who worked on a self-employed basis.
In this same month, MTB Affordability found that the average maximum loan of £221,400 was offered to self-employed workers.
The minimal average loan available to self-employed workers has also increased compared to late last year. MTB Affordability found that the minimum average loan for self-employed workers was £118,800. This represents a remarkable 43% rise compared to November 2020.
Despite this positive news, the fact of the matter is that securing a mortgage as a self-employed worker, contractor and freelancer remains much trickier than if you work in a traditional employment role.
While 71% of self-employed applicants had at least one lender available to meet their requirements, the market as a whole has an 80% availability rate.
The challenges of mortgages and contractors
It feels like a tale as old of time, but the truth of the matter is self-employed workers such as contractors and freelancers have always found it more difficult to secure that dream mortgage.
However, there is a feeling that lenders are increasingly aware of the challenges faced and at least some are able to accommodate somewhat.
Seeking expert contractor mortgage and freelancer mortgage advice is always worthwhile if you are finding it difficult to get the mortgage you want too. This can help guide your purchase and make sure you get the best deal you can.
Hopefully with the passing of time, more and more lenders will be accepting of and able to cope with the modern world of work.