One of the disadvantages of being a freelancer is it can be more complex being accepted on to a mortgage, as there needs to be enough supportive evidence to show you will be able to afford the monthly repayments.
Here are some tips on how to get a mortgage that will help make the process easier if you are a sole trader.
- Evidence of Earnings
Mortgage providers look at proof of earnings when considering an application, so it is essential that freelancers provide as much evidence as possible of their work history, contracts, and accounts.
Make sure all the paperwork is organised to show all paid invoices, any long-term contracts, and earnings as a freelancer so far.
Charlotte Grimshaw from Suffolk Building Society told What Mortgage: “We’re not trying to catch people out – we really do want to help people buy their dream home. Whether an applicant is a freelancer or not, it’s all about looking for positive supporting evidence.”
- How Much Evidence?
Those who are running their own businesses or are sole traders are required to provide two years’ worth of company accounts. Lenders tend to work out average net profit and determine a salary this way.
If you have had a poor financial year, such as due to the pandemic, mortgage providers will be able to take this into account if it is fully explained. Accountants can also provide projections of earnings to support the application.
- Get Your Deposit Sorted
As lenders tend to regard freelancers as a greater risk than employed candidates, they might not be willing to lend as much. Therefore, you may have to provide a larger deposit, so make sure you have enough money for a substantial down-payment, Money Guru advises.
For advice from small business accountants in Bolton, give us a call today.