Finding the best contractor mortgage rates
Many contractors worry that their dream of owning a home will prove tantalisingly out of reach. Lenders and mortgage providers can prove squeamish when providing mortgages for self employed people. Many applicants opt for a contractor mortgage broker to underwrite their application so that lenders can more readily understand the complexities of a contractor’s income. Many contractors running limited companies have chosen to keep their salary low for tax purposes, but this strategy wreaks havoc with their mortgage applications as banks generally use income as a key indicator of a candidate viability.
The best mortgage broker for contractors is one who specialises in explaining this very thing and can translate your accounts into something that banks will see as a safer proposition. Finding the right mortgage needn’t be stressful however, it’s just a question of perusing our search results which are specifically focused on finding the best mortgages for UK contractors.
Frequently asked questions
Can I get a mortgage as a contractor?
It is possible to find a range of mortgages for contractors but only if you know how to use the mortgage system to your advantage. Too many contractor mortgage applications have been turned down because the applicant went straight to a high-street bank where they were evaluated like a traditionally employed person and failed the bank’s affordability test.
A common hurdle to securing contractor mortgages crops up when contractors who run a limited company apply through traditional means. If a UK contractor runs a limited company it is often the case that they draw a lower salary for tax reasons. Your company’s profits could be very high and you’d still be turned down for a loan because banks simply don’t see this information as pertinent to your application.
How to get a mortgage
Getting a loan as a contractor requires the services of a skilled mortgage broker. They can take your CV and decode it for a bank’s mortgage advisors so that they understand the true nature of your business’s worth. They can prove that you have industry expertise, established clients and relevant qualifications, all of which shore up your application. However, the ultimate decider of the best mortgage rates for contractors will be their contract and its value. Banks will calculate a lending multiple based on the evidence of income from your previous work.
If you have struggled with bad credit or debt in the past, a good financial advisor should be able to help you correct your credit history and make the best case for you. If you find yourself in this situation, make sure you approach the advisor at least 6 months before you intend to get your mortgage so that you have time to correct your course.
Not all mortgages go to brokers but it’s definitely in a contractor’s best interest to use one. They provide a realistic portrait of a contractor’s ability to afford their mortgage payments and often produce a much more favourable outcome. You’ll still need to prove you’re working as a contractor so be prepared to provide at minimum 3 months’ worth of accounts to prove your earnings. Some lenders even require provide up to 3 years of accounts, so make sure that you plan ahead.
Contractor mortgages: how much can I borrow?
A rough guide to working out how much you can borrow for your contractor mortgage is to multiply your usual weekly rate by the amount of weeks you work a year. This is your approximate yearly salary. The approximate amount a lender would give you for your mortgage is up to 5 times your salary.
There are some lenders that are willing to give candidates a mortgage even if they only have a 10% deposit. However, the best mortgage rates for contractors will be reserved for those who can put a more sizeable deposit on their chosen property.
If you have experienced financial difficulties, it’s important that your finances hold up to scrutiny. It is usual that you have to show 3 months’ worth of personal and professional accounts. You need to show that your finances are in the black, that you’re not claiming jobseeker’s benefits and that there’s no evidence of gambling or quick fix loans.
Who are the best mortgage lenders for contractors?
The commonly received wisdom is that it’s difficult for contractors to find a mortgage provider willing to take them on but, although there are some complexities, there are plenty of workable ways to get on the property ladder. The trick to accessing the best mortgages is refining your search and approaching only specialist mortgage lenders that understand the life of contractor. You’ll find that mortgage providers are sympathetic to the particularities of contracting work if they are approached by an intermediary. Engaging the best mortgage broker or financial advisor you can find will help you ‘package’ your application to the mortgage companies, immediately making you a much more viable proposition.
If you’re a contractor who often finds themselves cash rich after a particularly lucrative job, it’s also worth looking for a mortgage lender that will allow you a penalty-free flexible or offset mortgage. This is a mortgage that allows you to overpay your agreed instalments when you have the ability to do so. Be warned however, this sort of mortgage agreement is quite difficult to secure and it is often the case that even the most generous of UK mortgage lenders will only allow a maximum of 10% of the total mortgage to be paid off per year.
Download our Guide to Loans & Mortgages
The big plus of working as a contractor is that you get more freedom in what you do in your career and when you do it. With freedom, though, comes risk – and banks tend to be wary of lending to contractors because of that. In this guide we’re going to talk about the kinds of loans and mortgages you can hope to get as a contractor.
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