Mortgages For Contractors
Contractor Weekly has teamed up with Freelancer Financials, a specialist firm of financial advisers, who have spent the past ten years helping contractors secure competitive contractor mortgages.
Everyone you speak to will have a different opinion or experience on what it’s like applying for a mortgage as a contractor. Working with our market-leading friends at Freelancer Financials we have set out a step-by-step guide to help you find your way through the maze and advise you of the best ways to go about attaining a contractor mortgage.
Could a contractor mortgage be a better option for me?
It can allow you to borrow substantially more than a standard mortgage, which for a small business owner is restricted by salary plus any dividends drawn. Contractor mortgages are based instead on your current contract rate, projected to an annual earnings total, with the tax planning option to draw a lower salary.
How much can I borrow on my contract rate?
Simply multiply your current contract day rate by the number of days worked each week x 48 weeks. Multiply this total by 5 to give the mortgage offer you can generally expect. So, a contractor on £450 per day could potentially raise £540,000 to buy or remortgage a property.
There’s usually far less hassle too. Unlike high street banks who expect three years’ trading accounts as proof of income, contract-based underwriting means you need only provide copies of your signed contract document, CV and three most recent bank statements.
Just started contracting, am I less likely to qualify?
Not at all. We will be able to secure you a mortgage, even though you just started contracting, because we deal with senior mortgage underwriters at the lender’s head office. It’s just one of the benefits of talking to us as Contractor Mortgage Specialists.
What if my current contract is due to expire shortly?
Dealing directly with senior level managers, we are in a better position to support your application. Most Lenders expect to see at least 8 weeks left before your contract is due to expire. However, with positive support from your agency regarding the potential for renewal or extension, we can often gain some flexibility.
Will I need a bigger deposit as a Self-Employed Contractor?
No. Even with a 10% deposit many lenders are offering competitive rates.
If you can fund a larger deposit however, your interest payments will be lower.
How can I get around the proof-of-earnings problem?
With our help essentially. At branch level, banks and building societies mostly view contractors as high risk applicants; so demand 3 years’ accounts to substantiate mortgage affordability. In your case, this evidence is unlikely to give an accurate picture of your income potential. As Contractor Mortgage specialists we can persuade lenders to offer funds on the more realistic basis of your contracted rate.
Will contractors and freelancers pay a higher interest rate?
Not through us. Your mortgage rate will be set as for any employee. Though the best rates are currently available with a higher deposit, it’s still possible to obtain a fixed rate of 5.59% with a 10% deposit – subject to having a good credit rating.
Is a self-certification mortgage still an option?
Self-cert mortgages have been banned by the FSA since 2008. Contract-based underwriting now offers you genuine mortgaging benefits and is better-suited to your employment status.
Why can’t I just go to a high street bank?
By all means do. However, the clear benefit in using our service, is a specialist’s understanding of the frustrations and difficulties contractors go through when trying to secure a mortgage. Our experience of your work sector and the trusted links we’ve made with the senior underwriters for high street lenders, ensures that your application will be dealt with in an unbiased and effective manner.
Consider this advantage carefully. A direct approach yourself, to the same lenders, could easily see you dealing with an advisor who doesn’t fully understand your contractor status. The default process will trigger a demand for three years’ accounts. If you are new to contracting, this could prove an impassable barrier to your hopes of a mortgage.
If that disappointment is not enough, do remember that every failed application on the high street adversely affects your credit history for the future. It’s a risk that you needn’t take.
How long will it take?
We can usually get you an Agreement In Principle (AIP) within a few hours of receiving your formal application. First though, we’ll need to receive a completed “fact find” questionnaire along with a copy of your signed contract to prepare a detailed summary and Key Facts illustration. The AIP will give you bargaining power with estate agents too.
Where can I find out more information?
A simple Google search for 'Contractor Mortgage Specialist' will throw up a myriad of companies claiming to be contractor-focused IFAs. To save you time, we have asked our friends at Freelancer Financials if they would be kind enough to provide FREE telephone advice to our loyal readers.
You can contact Freelancer Financials today on: 020 8421 7999 – Or request a Call back
Don’t even waste your time going directly to the high street lenders, the mortgage loan offered will be based on just the Taxable Element of your income only. Freelancer Financials are able to secure you a mortgage based on a multiple of your contract earnings alone.
If you are looking to take that first step on the ladder, move home, or to remortgage an existing property, Freelancer Financials will help you find a mortgage to suit your needs.