What is a contractor mortgage?
A contractor mortgage is simply a home loan specifically designed for people like yourself. We work with mortgage partners who understand that just because you’re not a permanent employee as such, lending to you is no riskier than lending to a traditional employee. Our partners can minimise complications and make the process as smooth as possible.
Do banks give mortgages to contractors?
Many banks do give mortgages to contractors, although it’s certainly true that many banks have yet to adapt to the new realities of working life in the UK, where millions of people are now classed as contractors. If your main income comes from dividends, then some banks might be hesitant to lend to you because of a seemingly low income.
Can I get a mortgage if I have a limited company?
Absolutely.
Since banks are sometimes not understanding when it comes to contractors and how they gain income from a limited company, it’s often best to use a broker who does understand your situation.
They can approach lenders – even high street lenders – at a head office underwriter level. People at that level are both more familiar with how you make your living and have greater authority to lend money.
Is it hard to get a mortgage as a contractor?
It doesn’t need to be.
You just have to be prepared to go through a specialist broker or financial advisor who has experience in setting up mortgages for contractors. They’ll have established relationships with lenders and underwriters that will help them to overcome any potential complications.
How long do you need to have had a contract to get a mortgage?
It used to be the case that lenders wanted to see three years of accounts, but lenders – and brokers – are now more open-minded. Your broker will include a copy of your current contract with your mortgage application, demonstrating your ability to earn.
Even if you’re relatively new to your profession, you just need to show a strong record of regular employment before you became self-employed.
Can I still get a mortgage if my contract is coming to an end?
You can, but it makes the situation a little more complicated. Lenders like to see a few months remaining on a contract, which they view as being a less risky proposition than a contract with little time left on it.
One thing you can do is ask your client to extend or renew your contract before it expires, explaining the reason why you need this, if necessary. If you’ve been working with a client for some time, you’ll probably find them amenable to this.
Alternatively, you can time a mortgage application for when you have a longer term contract in place.
How does a contractor qualify for a mortgage?
The same way that permanent, salaried employees do. Lenders will assess your ability to repay the mortgage, based upon your current contract rate, your credit score and potential risks, such as outstanding credit, defaulted payments or county court judgments.
Do I need a larger deposit as a contractor?
It can help smooth the process, but if you’re dealing with a lender that understands contracting, you won’t usually need a larger deposit. Again, it’s best to speak to a broker or financial advisor with experience in dealing with mortgages for contractors.
Of course, having a larger deposit will reduce the interest rate you pay on any mortgage, so it’s always a good idea to contribute as large a deposit as you can.
Are interest rates higher for contractors?
Definitely not.
In fact, interest rates can even be lower for contractors, particularly if you’ve built up a substantial deposit by putting money away during good months.
Not all lenders have realised that contractors can actually be a less risky group to lend to, but there’s certainly no interest rate penalty when it comes to contracting.
How much can I borrow as a contractor?
Just as with anybody else, this will depend upon the size of your deposit and your income. The only difference is that you’ll be assessed on your current contract rate, rather than your salary. Typically, you’ll be able to borrow around four times your current contract rate.
Although contractors often had trouble securing a mortgage in the past, lenders are now more flexible and specialist brokers can help you navigate the mortgage market. There are still considerations unique to contractors, but specialist brokers or financial advisors can guide you every step of the way, helping you get your name on those property deeds.
