If you work as a contractor or freelancer, you may be wondering if this affects your prospects of getting a mortgage. It’s certainly possible to get a mortgage if you are self-employed of course, although the application process can be a little more complicated. Here are some of the most important points to be considered.
What’s the difference between a contractor and a freelancer?
If you are not sure whether to define yourself as a freelancer or a contractor, the main difference is that a freelancer will usually work for multiple clients, while a contractor works full time for one client for a fixed period of time.
There’s usually a difference between the type of work undertaken as well. Contractors tend to take on outsourced regular work from larger companies, such as IT and coding projects, and project management. Freelancers tend to take on shorter projects, often in the creative industry, such as designing, writing, or in the performing arts.
Contractors are also more likely to work through agencies who will handle the administrative work such as invoicing and negotiating rates, while freelancers usually handle these jobs themselves. Because both types of employment do not guarantee a steady income, some mortgage companies may view this as a risk.
For this reason, it’s a good policy to look for a lender who will consider your annual average earnings, rather than your monthly income. Some lenders may even look at your average earnings over the last two or three years, which can be an advantage depending on your situation.
What factors will lenders consider when looking at my application?
The lender is likely to want to know how long you have been employed as a contractor or freelancer, and how much previous experience you have in your field. If you have been self-employed for less than two years, your choice of mortgage deals is likely to be more limited although some specialist lenders may still consider your application.
If you work in a field where your skills and training are in high demand, then this might be in your favour when it comes to a mortgage application because lenders will assume that it will be easy for you to find regular well paid work.
It’s important to remember that factors other than your employment status will affect your mortgage application. A lender will also take into account how much deposit you have to put down and what your other financial commitments are, just as they would for a company employee.
Therefore, it is a good idea to take a look at all your monthly outgoings to see if there are any areas for improvement. If possible, pay off any outstanding debts and set up direct debits to make sure that all your bills and loan repayments are made on time.
If you have a poor credit history, this will complicate matters further. It may be worth seeking the advice of an experienced mortgage broker, who will have established contacts with the lenders who are best placed to consider your application.
If you are looking for a mortgage broker in Winchmore Hill, please contact us today.