“We tailor our advice to you and manage everything with the lender from that initial application all the way through to your mortgage offer. Then we work with your solicitors right through to completion.”
Mike Haupt – Mortgage Adviser
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All about mortgages for contractors with Mike Haupt.
Are there specific mortgages for contractors?
The short answer is no – there aren’t individual mortgages for contractors or other specific professionals. But you might find there are certain schemes that apply, depending on your contract.
If you’re a professional contractor you might get a slightly different type of mortgage or a special rate, but broadly speaking there isn’t a specific Contractor Mortgage as such.
Do all lenders accept contractors for a mortgage?
Over the last few years lenders have generally decided to improve their stance on contractor mortgages. It used to be that a contractor had a very small selection of lenders to approach. But today, lenders understand contractor mortgages a lot better.
Some are much keener than others. We deal with over 90 different lenders and the vast majority will try to lend to a contractor based on their circumstances. Some lenders have specific underwriting criteria for contractors, while others will understand your position but not be so keen to lend.
It’s all about having that knowledge of the lenders available and how they suit your individual circumstances. But the great news is that there are more lenders available than ever and there are some really great options for you out there.
How much can contractors borrow on a mortgage?
This is the top question both on these podcasts and in talking to customers individually. My answer is always the same: it will very much depend upon your individual circumstances.
Lenders will look at your outgoings – student loans or finance of any description; they look at the property you’re buying – any ground rent or service charges; and they look at your contract – how much you’re earning and how your contract is set up.
There are different ways that contracts will be treated by the lender. You might be a straightforward self-employed contractor where we just use your tax documents to prove your income. You might be on short-term contracts in which case they might look at you slightly differently.
The best way to know how much you could borrow is to pick up the phone to us. We’ll talk through your individual circumstances and give you an accurate answer to that question.
How do contractors get a mortgage?
The application process itself is no different between a contractor and a non-contractor. But the underwriting and criteria with that lender might be slightly different. We’d want to do a lot of work upfront to make sure we understand your income and how it’s structured so we can find the right lender for you.
It means we can manage the whole application process smoothly. Lenders may ask for slightly different paperwork and it’s really important that we’ve got all that information to hand.
So the actual process itself is no different but the evidence and criteria will depend on the individual lender. We make it as easy as possible for you.
Does It Cost For An Initial Chat?
Please don’t be afraid to pick up the telephone. Contact us with any questions or any conversations you want to have. There’s no commitment, there’s no silly questions. I’m here to try and help put your mind at ease, so let’s have a conversation and answer your questions.
How is a contractor’s income assessed for a mortgage and what documents will I need?
Broadly speaking there are probably six or seven different types of contracts out there. There’s the typical self-employed contractor. You might have a fixed term contract, short-term renewable contracts, you might be part of an Umbrella company or an agency worker. Then there are zero hours contractors, subcontractors and professional contractors.
Your income will be treated slightly differently depending on the contract type, and you’ll need a slightly different set of paperwork. For example, if you’re part of an Umbrella Company you might be treated by a lender as employed. You would therefore only need payslips and P60s.
If you’re on a short-term contract, you might need to evidence your contracts over the last 12 months plus contracts you’ve got coming up. For a fixed term contract, the lender might just take that contract at its face value, or they might base your income on your day rate.
So the documentation we need will change depending on those individual criteria. It might be payslips, it might be tax calculations and overviews from HMRC, it might be your contracts or even your accounts. Again, we will put in all the work upfront, to make sure we’ve got all the right paperwork for the lender.
How can I strengthen my mortgage application as a contractor?
First, try and make sure you’ve got a good credit history. Keep on top of your current account so you make all your monthly payments. Having a good credit history is always going to help, but if you don’t have a perfect credit history, it doesn’t mean you can’t get a mortgage.
Next, make sure you’ve got all the right documents in place. Keep hold of all your contracts and any paperwork because that will make applying for the mortgage much smoother. Showing the lender that we’ve got all the documentation required will make everything a lot easier.
Your contract and your income will have quite an impact on what you can borrow and which lenders are available. So having all that documentation available will really strengthen your mortgage application.
What about a contractor buying with another person on a joint mortgage?
It depends on the person you’re buying with and their individual circumstances. Let’s say they had a straightforward, employed role with monthly payslips. Broadly speaking that would be a fairly straightforward process. We’d go through your income as a contractor and each person would be assessed individually, and your income then combined to calculate the total borrowing.
What else do we need to know about contractor mortgages?
For contractors, preparation is key, especially if you’ve got a complex contract. It’s all about doing the work upfront, having good conversations around your income and getting everything ready. That way, you will really know what you can afford to borrow and what that looks like as a mortgage cost.
So when you go house hunting or it’s time to remortgage, you will know what’s available and be ready to find the right mortgage. So preparation is key.
Your home may be repossessed if you do not keep up with your mortgage repayments.