In the rapidly evolving job market, over a million individuals are now employed in the ‘freelance economy’. This burgeoning group includes professionals offering services on a contract basis, manual labourers possessing varying degrees of skills, and a substantial number of couriers, fuelled by the recent surge in e-commerce. However, unlike their counterpart ‘traditional’ employees, these workers usually don’t receive pay during sick days or holidays.
For those working within the freelance economy, securing a mortgage can pose unique challenges as they’re often categorised as self employed in Newcastle by financial institutions. To increase the likelihood of a successful mortgage application, it’s important for such individuals to show a consistent employment history – ideally, one spanning over a year unless the contract extends for a longer period.
Should the lender classify you as a sole proprietor, you’ll have to provide proof of your net earnings after deducting expenses. In such cases, employing the services of an accountant might prove helpful. On the other hand, if you operate a Limited Company, lenders typically take the paid salary and any declared dividends into account.
Given the rise of gig economy workers, some mortgage lenders have adopted a more flexible approach when determining their income. If you’ve been operating as a freelance contractor and have an active contract, certain lenders may base your income assessment on your daily rate. This calculation involves multiplying the daily rate by 5 and then by 46 weeks. The assumption is that even full-time freelance workers do not typically work for 52 weeks per annum due to unpaid vacations. This model is particularly favoured by IT contractors who usually hold out for lucrative business contracts.
Just like freelancers or gig economy workers, self employed in Newcastle applicants must plan ahead before applying for a mortgage. Paying the minimal taxes may seem attractive, but bear in mind that lenders prefer to see a strong, sustainable earnings record. It’s advisable to start building a rapport with a mortgage advisor in Newcastle as early as possible. Furthermore, if you’re on a zero-hours contract, mortgage lenders typically require a year’s worth of earnings, and usually consider the average earnings for that period.
Date Last Edited: February 9, 2024