Expert advice for freelance actors and performers about how to increase your chance of getting a mortgage and what you can do now to prepare for future home ownership.
As a performer, your income structure can be quite unique with your personal finances fluctuating depending on your working situation. Due to the particular nature of the arts and entertainment industry, your monthly income is rarely the same each month – when work is busy, you’ll have an income that reflects the good times, and during quiet periods between roles, finances may be tighter.
High street mortgage providers tend to be rigid in their screening processes and, as a performer with an unpredictable financial situation, securing a mortgage from them can be a frustrating experience. Traditional lenders prefer to see a regular income coming into your account each month and they can struggle to understand the unique nature of a performer’s finances, with money coming in from multiple income streams – be it from contracts, self-employed work, or tax-free pay from a cruise ship gig.
That doesn’t mean you can’t own a home, but you may need some specialist advice to know which lenders will be more likely to say yes to your application.
We spoke with specialist mortgage adviser Austyn Johnson to see what wisdom he could share with Spotlight members who are browsing the housing market, or perhaps thinking about house-ownership in the future. Austyn heads up the ‘Mortgages for Actors’ branch of H D Consultants and understands the complexities of the finances of those who work in the arts and entertainment industry.
Here’s his advice to help navigate the complexities of applying for mortgages as a self-employed performer.
Why do performers sometimes struggle to get a mortgage?
90% of it is a lack of education in the financial industry. It’s very easy to blame it on performing arts being an insecure industry, but essentially performers are just self-employed. Self-employment as a whole is seen as complex income, which is weird, because to us, it’s something that’s quite simple.
Performers get paid in such a different way that a lot of lenders say no or they just can’t be bothered or don’t have the resources to spend the time to properly assess an application. And that’s why people come to us, because we do spend the time.
We show people how to lay an application out properly and then we present it to the right mortgage lenders who can understand self-employment to a certain point and show them how to look at the income better. So rather than you just being a number, they think of you as a person – “This is them, this is their salary, this is how they earn it and this is their history of earning…” We try to build a story for people.
Are there certain providers who make allowances for performer’s unique financial position?
Some providers are better than others. The mortgage industry is based on personal circumstances, so what works for one might not work for another. There’s 200+ lenders and I could list a lender off and they might be great for one person but not for the next.
We always try to start at the high street level as they’re the lowest rates because they ask for the minimum amount of risk. There are some lenders: Barclays, Santander, those sort of people, who are happy to consider the self-employed. If it’s a bit outside the box, they’ll just say no. However, there are lots of lenders out there that have a much better approach. Some of them will have their assessor ring us up and say, “I want to talk to you about this case because it looks like it’s good but I need to clarify.” And then we almost always get a yes before we even apply and before the client has even spent a penny. We already know that they’re going to accept because we’ve done all the work upfront.
What are the eligibility criteria that lenders assess for mortgage applications?
As long as you’ve been working, that’s the best start because you can’t pay for a mortgage unless you’re working. With self-employment, we need at least one year’s full accounts so we can show that there’s income and it’s provable. When you’ve only got one year of accounts, they’ll want to see on your bank statements that you’re still earning money.
If you can prove two or more years, then it shows a bit of a track record and they’re not quite so bothered about what you’re doing right now.
Because essentially a mortgage is a loan, they’re just asking whether you can repay it and they’re looking for proof as to how you can repay it.
What are the different types of mortgages available? And are any of them more suitable for a performer?
All are welcome in their own way. So it depends how you get paid, how you feel about risk and what you want to do.
There two main types of mortgage are:
- Capital repayment, which is just like a normal loan. You take the money out and then every month you pay back a certain amount, and at the end of that term (like 20 years, 30 years, etc.) it’s all paid off.
- Interest only, which means you’re only paying interest on the loan. At the end of that 20, 30 year term, the lender will say, “Can I have my money back please?” Which is always a bit of a problem, but if you’ve worked out a way of repaying them, then you can essentially be a bit more flexible with how you pay.
In the performing arts industry, if you’re paid amazingly twice a year, but then the rest of the year times are a bit lean, then an interest only mortgage might work well for you because you can plumb the money in when you’ve got it and when you haven’t, you pay the minimum. But that comes with the risk that at the end of the term, you’re going to have to sell the house to pay them back.
Whereas a capital repayment mortgage, although it costs you more, it almost guarantees you’re going to be paying the whole loan off and own your home.
Then there are fixed and variable mortgages, each having pros and cons.
- A fixed mortgage means you can budget every month because you know that for the next two, five, 10 years, it’s going to be a set monthly payment. However, if you’ve fixed at a certain interest rate and then the rates come down, you’re still fixed at the higher rate.
- A variable rate mortgage’s payments will go up and down depending on the interest rates, so you could end up paying less when interest rates are low. However, the downside is that it can also go up and can do so rapidly. If you go for a variable rate, it’s worth having money saved up so that you can pay the extra should your monthly payments increase significantly.
The type of mortgage you select will come down to your risk appetite and what you want to do.
How can a performer prepare to increase their chances of a successful mortgage application?
Start thinking about yourself as a business. You need to think if you, as your business, is out of work because of sickness or health, what’s going to happen? How am I going to cover that? How am I going to keep getting paid? Protect yourself and set yourself up right from the beginning. When it comes to the mortgage application, it will just make it smoother for you.
One of the biggest things you can do to help yourself, not just for a mortgage but also for your end of year taxes, is to have a separate bank account just for your business. Any money coming in from an acting job should go in there and any business expenses you spend (for example, your Spotlight subscription) goes out of that bank account. At the end of the year, it’s simple to see what you’ve spent, what you can deduct, and what you’ve earned. When you go to a mortgage application, you can show them what you’ve earned and how much you’ve spent to get it.
Also check your credit file as well because you never know what’s on your credit file until you’ve checked it.
What can you do to help performers who might be thinking about owning a home in the future?
I can show people how to save and how to look after their funds and how to spend differently on things. Even if it’s to have a chat with one of our team that looks into things like utilities, because even if they can trim a tenner off your bill a month by going with a different supplier, you could put that £10 into a deposit pot.
We just try to help people understand that they’re a business and that sets us aside from a standard mortgage broker as well because we’re not brokers – we’re advisors, and we advise on how you can get the mortgage, keep the mortgage and then carry on being stress-free. Well, as stress-free as you can be in these times.
Are there any schemes you’re aware of that can help people to save for a deposit?
There’s not many schemes other than the government ISAs and LISAs, but there’s a couple of apps that are good:
- Roundup – which rounds everything you spend up to the nearest pound and then saves the rest in a savings space. Most bank accounts have the ability to set that up.
- Plum – which you can set up to automatically save money for you in a separate account.
As a self-employed person, you should be taking 20% out of everything you earn anyway and putting it to one side. Don’t touch that for a deposit – that’s for tax.
There are lots of mortgage options. There’s some that have no deposit, there’s some that have a 5% deposit and so on. The more money you put in, the better it is for you and the more likely it is for you to get a yes from a mortgage provider.
But if you’re saving, be strict with yourself. Put aside a set amount each month and forget about it. Don’t think of it as a rainy day fund because it’s not – it’s your house deposit.
We’ve got some really good budget planners at Mortgages for Actors. People are welcome to get in touch with us and they can go through their finances to see what you actually have to spend to live, what you have to spend to pay your bills, and what you’ve got left over.
How do your services differ from approaching a lender directly?
We want to find out about you, what you do and how you work because we are then going to go to virtually 200 lenders. We’ll be able to write off a lot of them because of our experience of knowing how they work and from understanding if your criteria doesn’t fit. We have loads of tools and we use different filters to narrow down our research and then we pick up the phone and talk to the people behind that computer. We try to make sure they’re happy with the application and if they are then we try and find out how to get it through the front door.
Whereas if you go out today and walk into Halifax, you’re looking at one of 200+ lenders. You might spend an hour and a half in there chatting to them just for them to say, “Computer says no.” And then you’d have to go to another lender, and another one, and then another one. You might be really lucky and find a provider who says yes on the first, second or third try, but there’s a high possibility that because of the industry you’re in, you might not actually get to the offer stage.
On paper, your income might look really good, and it might go through the computers and you get a yes. However, when the assessor picks it up they might go, “Do you know what? We’re not comfortable with this. The numbers work, but we are not comfortable with lending to someone that works in that industry.”
The assessor will do a hard credit search on your credit file, which leaves a footprint and can drop your credit score. If every time you walked into a lender, you applied every single time, they’d all do a hard credit search, which again looks bad on your credit report because it’s as if you keep throwing something at it until it sticks and it doesn’t work like that.
That’s why we start at the beginning and do the research first, filter it down to lenders who are going to say yes and then work out who the cheapest one is of those yeses
What type of information should performers have to hand when they’re contacting you about getting help with securing a mortgage?
Don’t worry about anything to start with – let’s just have a chat because, at the end of that chat, we’ll already know roughly what sort of chances you’re going to have of securing a mortgage.
People should know:
- Roughly what they’ve earned in a year and how they’ve earned it.
- What their potential is for next year or the year coming by roughly knowing what they’re going to do next.
Even if a performer says to us, “I haven’t got a contract at the moment, I’m trying really hard to get one.” You’ve already told me you’re trying really hard to get one so there’s a possibility that you’re going to have one soon. So let’s talk about it.
If you’ve just started on a production and you’ve got a new contract, don’t wait for the contract to end before you talk to us because that contract could mean a mortgage. Talk to us ASAP.
If income verification is a challenge, what can performers do to prepare for that and what documentation should they have available?
If you freelance, absolutely everything. I’ll spend hours sorting through all these documents to find what we need. Even if I only use 10% of what you send me, they’ll be the ones that are going to work.
Documentation like:
- Bank statements.
- Any contracts you’re working on.
- Tax returns. They’re called SA302s for a tax calculation and essentially it’s one or two sheets that says what your profit was after expenses and before tax.
- Tax year overview. This is what you get sent in the post after you’ve done your tax return to show you what tax is due and what you’ve paid. It’s basically a receipt from HMRC. Having your tax paid off is a good idea, or at least most of it.
- A CV showing what you’ve worked on with start and finish and start dates.
Could they use their Spotlight profile, as their credits will be on there?
As long as it’s up-to-date, yeah.
What would your advice be to a performer who owns a home but is about to remortgage?
You don’t always have to do a full remortgage. If your provider offers product transfers, you can stay with your provider and we can negotiate a better rate or a different rate or even the best rate they can offer at the time. If, for example, when you got your house, you had a great contract, you’re earning £50,000 a year, and then, when it comes to remortgage time, you’ve had a particularly rough year, we might just say, “Do you know what? You’re not going to be able to afford to remortgage to another lender. So let’s see what your current lender, who’s got proof of you paying, can do.” They’ve also got a responsibility as well because they’ve said yes to you, why should they take it away? We’ll talk to them and see what they can offer.
Occasionally we’ll get a better deal than an online portal will, but it’s worth having a look at it in the first instance. If we do need to remortgage to another lender, we’ll do the sums to work out if it’s actually worth it and then we’ll come back to you with a rough idea of how much it’s going to cost and what it’s going to save you. Because if it’s not going to save you anything, there’s no point, is there?
If you’re one of those unlucky people that had bad credit or something a few years ago, then it might be that you had to go with a mortgage lender that doesn’t offer product transfers. We’ll try very hard to get you out of that mortgage because we don’t want you being a mortgage prisoner.
What else should performers consider when it comes to protecting payments for their home?
Insurance is really important nowadays. If you’re a dancer, your career has got a lot of risks involved with it, but it’s also got an end date and if your mortgage is 40 years and you’re 20 years old, can you still see yourself as a 60-year-old stage dancer? If not, we need to think about what’s going to happen and think about things like injury insurance.
Injury and sickness insurance is one of the biggest ones because when you’re self-employed you don’t get sick pay. The government will pay you something like £400 a month. Injury and sickness protection will pay you about 60% of what you used to earn every month potentially until you retire. So if you’re a dancer and, say, you fell off and broke your leg and couldn’t dance again, the insurer would pay you until you retire. That’s pretty amazing to have a guaranteed income for life.
If you’ve got a family, you should have life insurance because if you die you don’t want them to have to pay a mortgage. You want them to have some money to do something with it.
And then the other one is critical illness cover that covers things like cancer, heart attacks, strokes, etc. Some basic cover, even if it’s just the same as what you earn a year, can give you a bit of time for recovery. If one day you had a heart attack on stage, they took you off and then you were not able to work for a year, maybe two, it would be nice to have X amount of money in the bank to cover you for that period so you’re not panicking.
The last one is wills. Every one of our clients gets a free will.
What’s the process if someone wants to come to you and hire your services?
Talk to me. We don’t charge anything for research time or recommendation so talk to us to find out if you can get a mortgage before you spend a penny. You can find us on the website, social media, Spotlight, or we can arrange a Zoom or face-to-face chat.
How do your fees work?
£700 is the flat fee we charge to everyone, and that’s due on application. So that’s when we know you can have a mortgage, you’ve found the property you like, you’ve had your offer accepted on it and now you want to buy it. That’s when we charge our fee.
If, for example, we get halfway through and the valuation comes back and says something like, “The roof’s falling in so we’re not going to lend on it,” we’ll refund half of the fee, so the most you’ll ever spend on a failed application is £350.
Austyn will be taking part in a webinar on Monday 7 April that is free for Spotlight members to attend. Register your interest here.
About Austyn:
Austyn is a down-to-earth straight-talking mortgage adviser who heads up the specialist creative industry branch of Mortgages for Actors, which was established 30 years ago. Austyn specialises in providing expert advice to those working in the arts and entertainment industry who are self-employed or have a complex income.
About Mortgages for Actors:
Established in 2020 by H D Consultants, Mortgages for Actors is a specialist financial service for anyone working in the creative industry. They are mortgage advisers who help people working in this unique industry not only get a house but stay in it with remortgages, offering any insurances and advice needed along the line. They pride themselves on their service, aiming to offer a world-class service for every single client, whether you’re starting your first theatre gig or earning millions from blockbuster films.
