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Tom Appleyard talks all about mortgages for Contractor
Are there specific mortgages for contractors?
Rather than specific mortgages, it’s more a case of specific criteria for each lender. You should still have access to the same rates as everybody else, as your circumstances fit the criteria of the lender.
Do all Mortgage Lenders lend to contractors?
The majority of lenders will lend to contractors, it’s the type of contract itself, the length of time you’ve been a contractor, and even in some circumstances, the length of time that you’ve been in that line of work may come into it. There are a lot of determining factors, but in some aspects, all lenders generally will lend to contractors.
How much can contractors borrow?
As a rule of thumb, regardless of whether you’re a contractor or not, most lenders typically lend anywhere between four and a half to five times your income. Some potentially even slightly more, depending on how large your income is.
There can be other factors such as. the age of the applicant, the term of the mortgage, and any committed outgoings that affect affordability. It’s more an affordability assessment than specifically how much can this person borrow.
How do contractors get a mortgage?
Our advice would always be to contact a broker, because every circumstance is different. A broker should be able to assess your circumstances and look for the lender accordingly for your needs. Everybody’s different, It’s a case of trying to get somebody to piece that puzzle together for you.
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How is a Contractor’s income assessed for a mortgage?
It’s usually determined by the type of contract and the type of employment. Sometimes Contractors will be classed as Self-Employed and generally a lender would use the latest two or three years tax calculations and tax year overviews. They’ll look at the net profit if it’s a Sole Trader, and usually the salary and dividends, if it’s a Limited Company Director.
If the contract is a set annual salary, usually lenders take that figure and treat it as if they were an employed applicant. Sometimes, however, when it comes to Contractors, they’re paid on a weekly or a daily rate. In this instance lenders may use a specific multiple of that rate, whether that’s a daily or a weekly rate. It can vary from lender to lender in terms of what that multiple is and how many weeks or days they’ll use.
This is where it helps to go to a broker, to determine which lender is going to give you the best options. Finally, if that income fluctuates, such as on a zero-hour contract, lenders will look at that on a case-by-case basis. Usually they’ll require a good track record to determine what that figure they’re going to use is, of around twelve months
What documents does a contractor need to apply for a mortgage?
We would normally require the contract itself and any details of previous contracts, and then pay slips for up to twelve months, if possible, along with the usual requirements of corresponding bank statements, P60 and proof of deposit.
How can you strengthen your mortgage application as a Contractor?
I’d advise applicants to make sure they’ve got a track record in contracting, and can evidence that. If you’re just starting out then it might help to speak to a broker initially, to get an idea as to what might be able to be done, because some professions, such as teachers for example, may have a few more options than other employees that only have their first contract.
What about Contractors buying with another person?
Contractors that are buying with another person will still be subject to the criteria of the lender, but the other person is treated normally if they’re permanently employed or self-employed on a normal basis. It may help strengthen the case and your affordability if your contracting income is somewhat of an issue, but generally speaking it’s a similar sort of process.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE