Getting a mortgage when freelance...

sonaldo

My partner and I are considering moving house. I earn £62,425 a year in a permanent, full time job but, since May this year, she's been freelance. Her average monthly income is ~5k. ~1k of this comes from a regular contract and the rest from media appearances (e.g. podcasts, broadcasts), public speaking and columns for newspapers/magazines.

When applying for a 'mortgage in principle', when you click 'self-employed' in the drop-down it asks when the business was set up, net profit for the previous year etc. None of this seems applicable because she hasn't 'set up' a business and she doesn't yet have a year's worth of income...

As a result, we can't really get a sense of how much we can borrow. Is our only option speaking to someone (rather than applying online) or simply waiting until she's been freelance for longer?

amnblog

Minimum 12 months track record for your Partner for her income to be considered.

If she started in May, and is trading as a sole trader, her tax calculation on her self-assessment for tax year 2024/2025 will be the key figure, the amount shown on the self employed income line.

sonaldo

amnblog said:

Minimum 12 months track record for your Partner for her income to be considered.

If she started in May, and is trading as a sole trader, her tax calculation on her self-assessment for tax year 2024/2025 will be the key figure, the amount shown on the self employed income line.

Thanks. So are you essentially saying that we won't be able to get a new mortgage until she's been self-employed for 12 months? 

She was employed full-time continuously for a number of years beforehand. Is there any chance that that income could be taken into account? 

ACG

Most lenders need 2 years as self employed, there are exceptions though. 
The income to enter for them would be the net profit (ie income after expenses but before tax). 

But you cant really do that until after April next year once the tax return has been submitted. That means at the ominte you would not be able to use your partners income. You can still include her on the mortgage, but her income would go down as zero. 

kingstreet

Perhaps she should have her self-employment commencement date as 06/04/2024 as some well-known high street lenders require a full tax year (6 April to 5 April) of trading before they will take the income into account.

sonaldo

Thanks for all the replies so far. I've read that being self-employed in a similar role to the one you were previously employed in might be beneficial? Is there any truth to this? She was working full time employed as a journalist at a newspaper. Now she's a freelance journalist

ACG

Still 1 years books minimum is required.

sonaldo

Thanks for all the help. 

A slight clarification to the above: although my partner has only been full time self employed since May this year, she has in fact been doing freelance work since Jan 2022 (which she did alongside her full time employed role). As a freelancer she has earned the following: 

FY22-23: £346
FY23-24: £14,753
FY24-25: £30,055 (so far)

One thing I'm not clear on is what people mean when they say "at least 12 or 24 months earnings". Do they mean the immediately preceding 12/24 months? In the last 12 months (i.e. last Oct to now) my partner's earned ~37k, and in the last 24 months (Oct 2022 to now) it's ~41k. 

OR, by "12 months earnings" do they mean the last applicable Financial Year/April-April period (i.e. 06 April 2023 to 05 April 2024)?

OR does this vary by lender? Clearly, for us, the best 'interpretation' of her income would be what she's earned over the preceding 12 months. Would any lenders accept that? 

ACG

If a sole trader, its done tax year - April-April. 
If a limited company you can potentially do the tax year if doing SA302s or the company tax year if looking at net profit. 

In your case I suspect it will be tax year.