Contractors Mortgage

A contractor mortgage is only different from a mainstream mortgage in terms of how a lender will assess your eligibility for a loan. The underwriter will consider more specialist criteria in order to assess your needs on an individual basis.

In many industries contract work is becoming more common place and many of these are taken in a self-employed role with the “employee” being paid a daily rate and being left responsible for their tax and national insurance payments. The most common industries where this applies are IT, Telecoms, engineering and construction.

In these cases, many lenders will use their criteria for a self-employed applicant or require a long track record of the contract with proof that this is to continue. This doesn’t suit everyone; many people change from employed roles to contracting or if they are an experienced contractor they may regularly switch to other companies as their expertise is in demand. For those in the position of being a self-employed contractor for many years an accountant may well have advised them on ways to be more tax efficient and therefore show less income than the contract they are on.

Construction workers can often find that they are contracted under the CIS scheme and receive a weekly or monthly income from their employer but be responsible for a tax return at the end of each year, many lenders will treat them as self-employed.

As a mortgage is secured against your home/property it may be repossessed if you do not keep up the repayments.

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Frequently Asked Questions

Lenders have tightened their criteria over the past few years following the trend of being more careful in these uncertain economic times. As a result, some contractors have faced a struggle trying to source a mortgage. Contractor mortgages have previously fallen outside the bank and building societies strict lending criteria, as many lenders see it as a grey area. Therefore contractors typically use firms like ours, who can offer a more specialist, broader, service.

Previously lenders have been concerned by contractors not being able to supply consistent payslips, or where accounts don’t reflect true income: however, at Right Mortgage we can talk to you about this further so don’t hesitate to contact us even if you’re in this boat.

With our help, you can overcome these issues and find the right mortgage available for you. There are lenders with whom some requirements are not always essential, whilst other lenders will work on the value of the contract rather than your net profit, or salary and dividends when calculating eligibility. Lenders have now realised that contractors can be safe borrowers with a stable income. So in essence…getting a mortgage is totally possible if you are a contractor.

Not necessarily. Where technically you are self-employed and most lenders will want you to provide these for proof of income, there are lenders which may use gross earnings based on their calculation of your current day rate.

For example:

  • Day rate x 5 x 48 = £ Income

This will definitely increase your affordability to those lenders who will use your income from self-employment for maximum loan calculations. Though if you are not an IT contractor there could be some minimum income criteria so it is essential you get the right advice by speaking to one of our experienced team today.

Potentially yes. Some lenders allow some time off between contracts, continuous history is preferable but not always essential. It all depends on the lender’s criteria for your particular contract type and your circumstances and getting it right first time.

Some lenders will consider issues with your credit file, though there are restrictions and these may vary depending on your contract. To avoid the disappointment of a declined mortgage you should speak to one of experienced team right away.

Some, but not all, lenders do have minimum income criteria for all types of contractors but not all. We ensure we only look at placing you with the right lender for your circumstances.

This is common for contractors and we deal with it daily. It is best to get the right advice before you apply, as lenders take a different view on this case by case. We’ll take this into consideration when proposing you to lenders to ensure we match you with the right lending criteria.

Most lenders will prefer an end date and an amount of time remaining on the contract, however it does depend on your circumstances, what type of contracting work you do and career to date. However there may still be options to obtain a mortgage when a contract is rolling, it’s always best to talk to us about specifics so we can give the correct advice.

Not necessarily though the criteria around this differs from lender to lender depending on the contract and what you do. It is important if you are making use of the agencies umbrella company to apply to the right lender – we’ll obviously take that into consideration for you and make sure we only apply where you’ll be eligible.

Right Mortgage will have this discussion with you from the very start of your mortgage journey and would never make a recommendation that is not affordable based on the contract work you do. As all of our advisors are protection specialists we will also discuss these needs going forward. We recognise that your income may fluctuate, and we will help you plan accordingly.

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