Mortgages for Contractors
If you’re a contractor working through your own Limited company, and you’re finding it difficult to arrange a mortgage, a contractor mortgage may be what your need.
How does a contractor mortgage differ from a normal mortgage?
In basic terms, there is no difference. The same mortgage products available for normal mortgages are also made accessible for contractor mortgages. The only differences that divide the two are the underwriting and lending criteria. Interest rates for contractor mortgages are no different to standard mortgage products available to your employed counterparts. In simple layman’s terms a contractor mortgage is a mortgage arranged for a contractor who is unable to be assessed on a self-employed basis because they are unable to provide 2-3 years accounts or their drawings don’t reflect a true assessment of the affordability. Lenders that offer contractor based underwriting will typically base their assessment on a combination of specific factors that are unique to each contractor’s employment status to make a decision on whether to accept the mortgage application.
The following factors need to be fulfilled for contractors to be assessed in this manner:
- The daily/hourly contract rate of the borrower?
- The duration of the current contract and when it comes to an end?
- The trading and payment structure in which the contractor operates? E.g. Limited Company or Payroll Umbrella?
- Occupation? Are you a IT programmer, Engineer, Business Analyst or Accountant
- Length of time contracting? Have you just started contracting or have you renewed/extended your contract?
The above information forms the basis for contractor based underwriting, so it is vital to come prepared with all this information when you speak to our mortgage advisers. The above information enables us to bypass the normal self-employed underwriting criteria which require accounts. If you approach a mortgage broker and they don’t ask the above questions then you’ve approached the wrong mortgage broker. Obviously the size of the mortgage loan in relation to the price of the property, referred to us Loan to Value (LTV) will determine the competiveness of the rate you can secure. The larger the deposit your are willing to put down the better the rate the lender is willing to offer. Contractor mortgages start at 90% LTV, which means you will need a minimum deposit of 10%. Another critical factor determining whether you can get a mortgage is your credit history and score. We recommend that you check your credit score before you apply for a mortgage; this can be achieved by going online and using Experian or Equifax.
A contractor mortgage is no more expensive than a standard mortgage sourced by permanent employee as long as you seek help a contractor mortgage specialist that is experienced working with contractors.