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.
We have worked closely with CMME for many years. Here the team answers some of the most commonly asked questions by contractors. Scroll down for a quick mortgage quote enquiry form.
Read on for answers to the most commonly-asked questions about securing a mortgage as a contractor.
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.
Can I get a 95% contractor mortgage?
The answer is yes, however more competitive deals are usually available to borrowers with a minimum of 10% deposit.
If you are a contractor and have only got a 5% deposit, then we can help in two ways either via the Help To Buy scheme where an additional 20% (40% in London) deposit is provided by a Government-backed loan scheme in order for you to purchase a new build property.
Or with lenders offering both 95% products and a contractor-friendly policy. Multiple High Street lenders are willing to lend using specialist contractor criteria to contractors with a 5% deposit.
How much can I borrow?
Unsurprisingly, this depends on a number of factors, including:
- The size of your deposit.
- Your contract rate / other income.
- Any existing financial commitments you may have.
- Your credit rating.
- How many applicants there are.
However, in general, contractors should be able to borrow up to 5 times their annualised rate via our partner’s mortgage lenders.
Find out more about your mortgage options
To get in touch with CMME, the UK’s leading contractor mortgage broker, simply fill in the quick quote form below, or click here to browse the CMME site.
IT Contracting are not authorised to offer regulated mortgage advice. IT Contracting are introducers to CMME. Financial advice is given by CMME, which is a trading name of Mortgages Made Easy Limited and is regulated and authorised by the Financial Conduct Authority (FCA reg. 414798).
Your home may be repossessed if you do not keep up repayments on your mortgage