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Contractor Mortgages: Proving Historical Income

Q. Can I still get a mortgage if I’m on my first contract and have only been trading for 8 months through my Limited company? A number of high street lenders have rejected my application and have told me that I need a minimum of 2-3 years accounts.

A. The simple answer to this question is YES but it does depend on the type of contracting work that you do. If you’re an IT Contractor, Halifax will accept contractors’ applications from their first contract. In other words, no need for trading history or accounts. As long as you have been working in IT for a minimum of two years prior to contracting, they will assess you based on your contract rate. I know that sounds too good to be true but that has been the case for many years. However, Non-IT contractors must earn at least £312.50 per day or £75k gross a year. Gross Pay is calculated as follows: (Daily Rate from contract x 5 x 48).

Buckingham Building Society needs a minimum contracting history of 6-months only, so we could take you to them too. Minimum day rate for non IT contractors is £175/day or £42k gross.

So it’s not all doom and gloom, but it’s important that you speak to a mortgage specialists that deals with contractors. To find out more, contact Freelancer Financials, they will be able to advise whether you qualify and what your next steps should be.

For further information visit the Contractor Mortgages page.

By John Yerou

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3 thoughts on “Contractor Mortgages: Proving Historical Income”

  1. The Q

    In 2006, I was in the situation where my current contract and previous years of work (was not working all year etc) would not satisfy bog-standard lenders for a 200K mortgage. However I had 250K in investments (50K of which I was using as deposit) . The mortgage broker basically showed I had assets equal to the value of the property, and when I did work all year had the means to easily pay the mortgage.

    All lenders approached gave me the nod, and their only real condition was on whether I was extending my current contract.

    So … before you went freelance I assume you were an employee of someone. Therefore you have the following ‘history’ :

    – earnings (your annual salary as a permie etc)
    – assets (savings, investments etc)

    This, together with your current contract, should allow mortgage brokers to paint a far better picture to lenders of your suitability. I understand since the financial crash things are more stringent (size of deposit etc) , but no doubt a good broker will be able to present your case well enough to get you a mortgage.

  2. MIFIDMan

    The landscape for mortgages has changed significantly since 2006 for two reasons; the obvious financial crisis mentioned in your comment but also the Mortgage Market Review 2014 which has caused many people issues during the application process (including contractors but also existing mortgagees trying to change product)
    Impact has been a significant emphasis on your actual spending patterns
    It isn’t straightforward…agreed that best advice is discuss with a broker used to contractors

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