Contractor Mortgages

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Your home may be repossessed if you do not keep up repayments on your mortgage.

Contractor Mortgages

All about mortgages for contractors with Jess Edwards.

Are there specific mortgages for contractors?

Yes, there are. Just going back to the previous podcast about the self-employed, who are generally treated the same way as anyone else, interestingly, there are specific products on the market designed for contractors.

Do all the providers lend mortgages to contractors?

Most lenders will lend to contractors. Obviously they all have their own guidance and policy around it, but the majority of them are happy to accept people who are contractors.

That’s based on a number of factors, including how long you’ve been contracting and how long the current contract is for. The field you work in is important too – is it sustainable? So a number of factors are taken into account, just as with any normal mortgage.

How much can contractors borrow on a mortgage?

Contractors would go through the same affordability model that we all go through when applying for a mortgage. If you’re a day rate contractor, the lender will look at your daily rate, the weekly rate and calculate your annual earnings from that.

Lenders normally multiply that weekly income by 46 or 48 weeks to allow for holiday, while other lenders will accept 52 weeks. That’s the main difference with regards to how they calculate affordability.

How do contractors get a mortgage?

It’s always best to look at all the lenders to find the best deals available. We search the market for you. A good broker will know which lenders are best suited to people who work on a contract basis.

How you get the mortgage is exactly the same process as for a normal borrower. The only thing that differs is with regards to the documents – which we will come onto shortly. you would go through the same affordability process as an employed person.

How is a contractor’s income assessed for a mortgage? What documents does a contractor need for a mortgage application?

How the income is assessed depends on the type of contract. Lenders will often work out your day rate over 46 or 48 weeks. You will need to prove that with invoices and contracts.

There are a lot of different types of contract out there – zero hours contracts, day rate contracts and short or long term contracts. A lot of contractors could be deemed as self-employed, especially if they manage their own tax affairs. If that’s the case then we would just prove your income using your tax calculations and tax overviews.

If you’re not dealing with your own tax and that’s done via PAYE with the company you’re contracted to, your income would be assessed through your invoices or payslips.

How can you strengthen your mortgage application as a contractor?

One thing that lenders do look for with contractors is a strong track record. For example, if you’ve been on a contract for a number of years, clearly that’s a sustainable job. Lenders will always look at your track record in the field you work in to understand how much experience you have.

If you haven’t been on a particular contract for long, you could strengthen your mortgage application by demonstrating a good track record of similar contracts and other work in your professional field.

What about contractors buying with another person?

Buying in with another person is only going to strengthen your mortgage application, because ultimately there will be two people taking on the mortgage. That’s going to make things even stronger for you.

But it’s exactly the same process whether you were taking a mortgage on your own or jointly with somebody else. That would not be an issue at all.

How can a mortgage broker help with a contractor mortgage?

There are so many different types of contracts out there so it’s always best to seek mortgage advice. A broker is the best option, as we have access to multiple lenders.

We know the lender’s criteria with regards to these types of things, so if you are a contractor and you’re unsure of how to calculate your income and your affordability, just leave it to the professionals and let us sort that for you.

Your home may be repossessed if you do not keep up with your mortgage repayments.

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