Contractor Mortgage FAQs

Frequently Asked QuestionsWhen did you last hear a contractor or freelancer express how easy it was to find a decent mortgage provider? Not recently.

There are exceptions; but, for the majority, securing any finance when you’re a contractor is no gimme.

Through a combination of personal experience and engaging on countless forum threads, we realise exactly how scarce mortgages for contractors have become since the self-cert was shelved.

Not that we ever believed self-cert was the right way for contractors to fund their home purchase in the first instance. It was perhaps the right mortgage for Sole Traders and Self-Employed entities who didn’t declare all of their earnings.

In those instances, it was very much a case of the banks saying:
“Well, tell us how much you earn. How much of that you declare to the Revenue is your concern.”

Because the self-employed and many freelancers were securing mortgages this way, self-cert also became the accepted product Independent Financial Advisors would offer to contractors.

Traditional brokers subsequently tarred all self-employed people with the same brush and it stuck. Sad to say, many still do.

The good news is that contractors are in a much stronger position than that. The reason: they can be assessed on the strength of their contract alone.

However, putting your trust in a specialist mortgage broker is essential if you want to reap the benefits of your contractor status.

You may argue that we would say that. But so many of our clients have struggled with these issues before coming to us in the past, we’ve collated answers to our most frequently asked questions into one resource, here.

The following answers address those past concerns and will help you to define what’s missing from your approach. And it is your approach, not your circumstances, that is tripping you up.

In this 3-part F.A.Q., we’ll:

  1. clarify the contractor status itself, first;
  2. then address mortgage-specific queries;
  3. and finally explain why Freelancer Financials is different from other service providers.

When you’re done absorbing this extensive resource, you’ll feel confident that it’s with the lenders and not you where the real problem lies.

We challenge you to surprise yourself yet further by realising how much you can borrow through a specialist broker using our mortgage calculator.

Contractor

Let's start with the basics. Many contractors don't actually realise that that's what they are. Now that seems a strange statement, but one worthwhile pointing out.Many see themselves as freelancers, but there's a subtle - and very important - difference. We don't want to give anyone false hopes about what we can and can't do for them.

What is a Contractor?

In the context of contractor mortgages, contractors work through their own limited company on short-term contracts, typically 3-, 6- or 12-months long. Read More...

Why walking in off the High Street won’t get you a contractor mortgage

Banks using accounts to work out affordability, typically High Street lenders, won't help contractors like those who use their contract rate. Read More...

I’ve just started contracting. Am I at a disadvantage?

It needn’t matter how long a contractor’s been contracting before they can get a mortgage using their new contract rate, even if it’s their first day! Read More...

How long do I need to have remaining on my contract?

The time lenders like contractors to have left to run on a contract before approving their mortgage can differ vastly, but 4-6 weeks is the norm. Read More...

But my adviser insisted I need 3 years accounts to prove my earnings!

The first big mistake most generic lenders make is to try to get a limited company contractor a mortgage using their accounts. Don’t waste your time! Read More...

What about Contractors operating through an Umbrella Company?

High St lenders like payslips, so an umbrella contractor should get a mortgage offer no problem, right? Not quite. Hint: use your contract instead Read More...

What supporting documentation will I need to provide?

Contractor mortgages are straight forward (if you look in the right place). Documents you need to support an application are likewise uncomplicated. Read More...

Contractor Mortgages

We've ascertained that mortgage lenders make many incorrect assumptions about contractors. But it's not all one-way traffic. Conversely, those new to being self-employed also don't yet understand how the products on offer to them differ from what they may have been used to as a permanent employee.

What’s the difference between standard and contractor mortgages?

A permie’s mortgage will use PAYE salary to determine how much they can borrow. Contractor mortgages use contract or day rates, but ‘annualised’ Read More...

I’ve had a self-cert mortgage before. Is it true they’re banned?

The FCA banned self-cert mortgages once the housing bubble burst. We think it’s the best news for mortgage-hunting contractors in years; here’s why: Read More...

Will I need to put down a huge deposit?

Contractors don't need bigger mortgage deposits than permies, with 5% our entry level. The more ANY buyer puts down, the lower their interest rate. Read More...

Are interest rates much higher for contractors?

High interest rates for contractors are a legacy from self-cert mortgages. But lenders with whom we work don’t discriminate against independents. Read More...

How much can contractors borrow?

To maximise mortgage affordability, a contractor needs a lender who uses day rates (not accounts) as the basis of their calculations. Here's why: Read More...

Can I get an “agreement in principle” before making an offer?

We specialise in getting contractors a decision, or agreement in principle. This detail can add considerable credence to your search for a mortgage. Read More...

How long do contractor mortgages usually take to complete?

Because of their simplicity, genuine contractor mortgages often complete in less than a month. Ask your broker if you need a mortgage quick! Read More...

Are there any upfront costs involved?

Fees vary between the type of mortgage you’re taking out and the lender that you’re going with. Lenders can charge some, all or none of the fees. Read More...

What happens after the initial interest rate expires?

Mortgages come with low, fixed-term initial rates then switch to a lender’s variable rate. You can remortgage before paying their inflated SVR! Read More...

Will I have to pay stamp duty?

If your mortgage is above the lowest threshold for zero stamp duty, you must pay it. There are different levels, depending on how much your home costs Read More...

Is it compulsory to take out a lender’s insurance with my mortgage?

You don't have to buy a lender's life insurance or protection policies with their mortgage, great news for contractors who source their own cover. Read More...

What do I do next?

After reading our FAQ, you have three choices: try our mortgage calculator, read more guides or, you know, actually make it happen and give us a call. Read More...

Freelancer Financials

As a specialist contractor mortgage broker, Freelancer Financials has access to the whole of the market. This means we're not tied in with any one lender or associate. Our mortgage offers are now available from a number of contractor friendly lenders, with each of whom we've agreed bespoke underwriting terms that work on your contract rate alone.

Why is Freelancer Financials different to other mortgage brokers?

As a specialist broker, getting contractors a mortgage using their contract rate (no accounts or payslips) isn't just what we do, it's ALL we do! Read More...

Why use a mortgage specialist rather than my bank?

Limited company contractors need specialist mortgage brokers to both interpret their income to underwriters and align them with the right lender. Read More...



Author: John Yerou

John Yerou is the owner and founder of Freelancer Financials; a trading style & trade mark of the award winning Mortgage Quest Ltd. One of the most recognised names in providing mortgages for contractors and freelancers across the UK.

In 2004 John began his career in Financial Services as an independent mortgage adviser and broker. John has been instrumental in negotiating bespoke underwriting for contractors with high street lenders.

His presence in the industry as a go-to expert is growing by the day and he is regularly cited and writes in publications both locally and nationally.



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