The changing face of the workplace means the number of ‘non-standard’ mortgage applications is set to grow by 67% over the next five years.
According to new research from specialist lender, Together, lending to self-employed mortgage applicants is set to grow from £20.9 billion in 2023 to £34.8 billion by 2029 – that’s a massive 67% over the coming five years.
The past 20 years have seen the number of self-employed people grow significantly, from 3.2 million to 4.3 million, and the first quarter of 2024 showed this trend isn’t set to change any time soon, with a further 183,000 people joining the self-employed workforce.
Getting a mortgage when you’re self-employed
Becoming self-employed has many benefits, such as greater flexibility and work-life balance. Still, unfortunately, if you’re self-employed – whether you’re a freelance writer or company director – you’re more likely to be turned down for a mortgage from a high street lender. This primarily comes down to factors such as having a fluctuating or sporadic income, multiple sources of income, or being unable to provide evidence of income – all of which class you as a ‘non-standard’ applicant.
A more flexible approach from lenders
However, with more people becoming self-employed, there’s clearly a need for a more flexible approach to lending.
According to John Barker from Together, as more and more people work as sole traders, freelancers, or majority shareholders, a more inclusive approach is required from the financial services industry, where common sense is applied to lending with applications judged on merit.
Our founder and managing director, Monica Bradley, says that if you’re self-employed and have been rejected by a high street lender, you shouldn’t give up hope.
‘It’s all about getting a good broker with access to a wide range of mortgage products,’ she says. ‘A good broker will have every base covered. We have self-employed clients working as sole traders, company directors and contractors.’
Five tips for self-employed mortgage applicants
If you’re self-employed and looking to apply for a mortgage, here are some things to think about if you want to improve your chances of being accepted…
1. The length of time you’ve been self-employed matters
The time you’ve been self-employed is key – lenders generally want to see at least two years’ worth of accounts. However, some specialist lenders will consider your application if you’ve only been self-employed for one year, so using a broker who knows the market is key.
2. Be ready to prove your income
A lender will calculate the amount you can borrow depending on the nature of your business. If you’re registered as a sole trader or partner, lenders will consider your net profit, while if you’re a limited company, they will look at your salary and dividends. Either way, be sure to have your paperwork ready.
3. Keep track of your upcoming work
Proving you have a steady stream of work or having evidence of future jobs lined up is beneficial, so ensure your workload is well documented.
4. Get your finances in shape
You’ll significantly improve your chances of getting a mortgage application approved if you have a good credit rating. Make sure loans are paid on time, and don’t take out new loans or make large purchases just before applying for a mortgage.
5. Speak to an experienced mortgage broker
Many of our clients are self-employed, so we’re perfectly placed to understand the challenges you may face and will also know which lenders are more likely to be receptive to self-employed borrowers. We’re here to help if you need some advice on getting mortgage-ready.