There was a time when, unless you were a traditional 9-5 employee, your chances of being able to secure a mortgage (at a reasonable rate of interest) were slim. In recent years, the major mortgage lenders have relaxed their lending criteria in line with the changing nature of the UK’s workforce.
Despite this, some contractors may still have difficulty accessing ‘high street’ mortgages, especially if they are unable to prove their income (for example, if they have only recently started contracting, or don’t have several years’ company accounts).
For this reason, we’d recommend using a specialist IFA who has access to ‘contractor-friendly’ mortgage lenders who understand the way contractors work in practice.
Our team have worked closely with Contractor Financials for over 15 years now. Here the team answers some of the most commonly asked questions by contractors (including the Government ‘Help to Buy’ scheme).
Read on for answers to the most commonly-asked questions about securing a mortgage as a contractor, or for a quick quote, fill in the form below.
Can a first-time contractor get a mortgage if they don’t even have company accounts yet?
If you go to your local bank or building society branch in search of a mortgage then the in-house mortgage consultant will inevitably ask to see three years company accounts to verify your income, which can be impossible if you are new to contracting. Even after many years in the field, you may still not want to draw a taxable income sufficient to secure the mortgage you need.
We bypass this archaic system by approaching key mortgage underwriters direct to negotiate specialist terms for contractors and have used our experience and influence in the industry to secure contract based underwriting with many of the UK’s largest lenders.
Using a multiple of your annualised contract rate rather than accounts allows our clients to borrow far more because any tax saving methods that your accountant has recommended will have no impact on your loan amount.
As a first time contractor, you would traditionally have had to hold off on your goal of home-ownership until you had built up 2-3 years’ worth of accounts, but contractor-friendly lenders will simply require a copy of your current contract, three months’ bank statements, photo ID and a utility bill for proof of address.
As long as you can produce these documents, we can often secure your mortgage on day one of your first contract, so there is no need to wait to buy your new home or remortgage.
Can contractors get access to ‘high street’ mortgage rates, or will they have to pay a premium?
If you are applying direct to the lender then they may charge a premium depending on what your accounts show and how long you have been contracting, or they may demand that you pay a higher deposit.
However, the contract based underwriting that we have negotiated with these High Street lenders allows you to access the same rates as your permanent colleagues, because we have an extensive history of preparing our clients applications correctly and only submit cases that we know will meet the lender’s criteria.
As such, we have built up a level of trust with the underwriters that means we often have access to exclusive rates that are not available direct or through other brokers.
Contractor Mortgage Calculator
Use this calculator to work out how much your monthly payments will be according to the repayment period and interest rate you secure.
What affect is the ‘Help to Buy’ scheme having on the mortgage market so far?
The Help to Buy (HTB) scheme has had an unprecedented effect on the mortgage market and has added a renewed energy to high LTV lending since its launch in April 2013.
Phase one, the Equity Loan, enables the homeowner to purchase with just 5% deposit as you apply for a loan of 20% of the property value from the Government. The homeowner will then need to apply to a participating Lender for a mortgage to cover the remaining 75%. This phase of the scheme is only currently available on new build homes and can prove to be a lengthy process as the homeowner needs to apply for two separate loans and go through all the necessary paperwork and credit checks twice. We can help with both applications but we haven’t seen a huge demand for phase one of HTB amongst the contractor community, however phase two is proving to be far more popular.
The second phase, the Mortgage Guarantee, is far more straightforward for the homeowner as you simply apply to a participating mortgage Lender for a 95% LTV mortgage at their chosen rates. The lender will then make an independent application to the Government for the mortgage guarantee which acts as an insurance policy to cover their liability if you default on your mortgage. This saves the homeowner the hassle of two applications and enables you to borrow at an affordable rate with just 5% deposit. Our contractor friendly lender, Halifax, has joined the scheme and we have already seen a number of our contractor clients complete on their purchase.
Whilst it is great news for those homeowners that have been able to purchase using the scheme, the real benefits can be seen across the mortgage market as a whole. HTB has inspired many lenders to lower their rates across their entire range of higher LTV products and some lenders have chosen to launch 95% products outside of the HTB scheme using their own indemnity insurers and often at more competitive rates.
How to get a contractor mortgage
For more information, simply fill in the quick quote form above, or click through to Contractor Financials for further details.
Financial advice is given by Contractor Financials, which is a trading name of Contractor Financials Ltd and is regulated and authorised by the Financial Conduct Authority.
Your home may be repossessed if you do not keep up repayments on your mortgage