Self Employed and Contractor Mortgages have become increasingly confusing – and in recent years, the arrangement of these mortgages has become increasingly difficult.

Self-employed workers (including freelance and contractor) can experience fluctuation and variance in their earnings compared to salaried or employed workers. In addition, there is less security in self-employment and the likes making it a struggle to secure property finance via high street lenders – and the frustration is that their income is likely to be more than what they require to ensure the financing need.

Previously, self-employed workers could provide self-certification of their earnings. However, this is no longer legal – this has caused more rigid and structured rules around self-employed workers and beyond being able to secure this type of financing.

How do mortgages work for Self Employed (Including Contractor and Freelancer)?

Firstly, self-employed mortgage products are specifically designed and are not identical to residential mortgage products. These are calculated differently than standard residential amounts with a focus on income and affordability.

Typically, self-employed individuals seeking mortgage finance will require two years’ worth of accounts with a consistent track record of income. Alongside this, self-employed mortgage seekers expect to pay significantly more deposits and have better than average credit scores. Some lenders will require less or more than this, but their criteria and rates will likely fluctuate to reflect this.

In addition to this, an accountant will be imperative to ensure your accounts are suitable and up to date and provide the information needed to justify your average earnings over some years.

Furthermore, your application will be affected by your employed structure, whether it be a sole trader, director, partnership and more. Although, in some instances, lenders may not accept some types of income paid from business, regular income, including bonuses and commission income, can also be considered in different calculations.