The decision to be so transparent about our contractor mortgage lenders is somewhat unprecedented. When we first informed our brokers, you could have cut the tension with a chainsaw. Whilst we understood their reservations, neither they, us nor you need worry.
You see, we deal at a level beyond the advisers at call centres and in your local High Street branch. It’s not that we don’t trust them to reward you with the mortgage your earnings deserve. No, that’s a fib. It is that we don’t. At least not at branch level. But this is not their fault. Nor yours. Nor ours.
Why specialist mortgage brokers exist – at all
Confused? Okay. There is and always will be a need for specialist mortgage brokers. Not everyone fits into neat little pigeon holes. Not everyone has a regular payslip or P60 to verify their earnings.
Freelancers, who flit between projects, typically have little ‘evidence’ to support their applications. Other than their past accounts, that is.
Contractors, who roll from 3-, 6- or 12-month contract to the next, are only as ‘safe’ as their current contract. Or their impending renewal if they’ve been savvy enough to secure it in advance.
Should this lack of visible security mean a permanent exclusion from owning their own home?
Not if we believe Chancellor, George Osborne. The UK, under Tory control, would be awash with self-employed business owners. Also, the success of the UK economy is dependent on the housing market prospering. Would there be room for both if home ownership was the sole providence of permies?
Of course not. And neither do we see it that way.
Where the High Street lenders lose the plot
Many of the lenders with whom we deal have a different view. Contractors walking in off the street will not get the same deal as those who apply through a specialist broker.
Don’t get me wrong, it wasn’t planned that way. But niche sectors call for specialist knowledge. Not only what we know, but also who we know. I’m not saying that to be boastful. It’s plain fact.
Getting out of the starting blocks
Take this as an analogy, if you will:
Your local mechanic. He can fix your car, no problem. It’s feasible that he could have a bash at Lewis Hamilton’s F1 motor, too. He may even get it to work. The car may even make it around Silverstone.
But would Hamilton make the podium, even with the average mechanic’s best efforts? Doubtful.
It’s the same with contractor mortgages.
You could well get lucky and land an advisor who’s aware of his employer’s contractor policy. Or, they may offer you a mortgage that will do the job, but based on your accounts, not your contract.
But with so much at stake, amassing searches on your credit file that could ruin your hopes of owning your home, is it worth the risk?
That’s where we come in.
Multiple searches – giving you the credit you deserve?
Before we move on, let me just explain a little bit about searches. Moreover, the subsequent rejections that could deal a fatal blow to your aspirations of owning your own home.
It works like this.
You walk into your local Clydesdale branch after Google informs you that they do mortgages for contractors. You take in your contract, they ask for your accounts, you return with them a week later and you’re rejected.
Because, as we all know, limited company contractor accounts do not show your worth in the most positive light.
So, you’ve burnt that bridge. You decide to try a different tack after talking to your peers.
You walk into Halifax based on a colleague’s recommendation. Rather than ask for a contractor mortgage, you ask for a ‘self-employed mortgage’, instead. More lenient, right?
Perhaps, but you’re still not going to get a mortgage. This time, thanks to the tax-efficiency of your accountant. Before you know it, your faced with yet another rejection.
But what do they see when they execute a credit search?
Their reaction? They won’t even bother to follow through with your enquiry any further.
Why? They know that both of those mortgage lenders are contractor friendly. If you didn’t qualify for those then why should you qualify a few days later?
Your credit history doesn’t heal that fast!
All the while, you could be sitting there with a bona fide contract that could have gotten you a mortgage. But, because the adviser:
- hasn’t presented your contract in the right light;
- hasn’t forwarded it to people who understand how to value it;
- has tried to get you a mortgage based on your accounts;
you’ve left so many nasty footprints on your credit file it’s gonna take time to clean up before you can try again.
Don’t shoot the messenger
You may think we’re scaremongering. That this sequence of events just would not happen in IRL. Well, let me tell you straight: I base this testimony on very real conversations our advisers have every single week.
But it’s not only the front line staff in banks that get it wrong.
We even get calls from underwriters of contractor-friendly lenders asking for the accounts of a client whom we’ve referred. That takes another call from us to the bat-phone to get a senior underwriter to either take over the case or lend a hand to their understudy.
Ask for Fred. He knows where the right stuff’s kept
Okay, one last analogy, to explain why that happens and then you can proceed as you see fit. Contractor mortgages are not the main ingredient in a bank’s income pie. Not by any stretch. You could even go as far as to say they’re a rarity.
Imagine, if you will, a plumber’s merchant. For year’s they’ve been carrying a range of boilers.
Models come and go; some get revamped, others get discontinued. When the latter happens, this particular merchant wipes that model’s records from their inventory. A common enough business practice.
But Fred, who’s worked in the stores since outside WCs were the height of fashion, always keeps a stash of the boiler’s spares. You know, just in case?!
Joe, the plumber, turns up on site to fix a boiler. Lo and behold, it’s one of these old, discontinued models.
He’s bought parts for it before from our merchant so dispatches his tea-boy apprentice to pick up a replacement valve. Half an hour later, the apprentice returns, fiddling with his cap, but otherwise empty-handed.
After explaining to Joe that the merchant had no records of such a part, the plumber sends him back. Only this time, Joe tells him not to go to the trade counter, but to go see Fred.
An hour later, the apprentice returns with the exact part.
It had taken him longer this time around because Fred had related the boiler’s history over a cup of coffee. But the good news? That’s all it had cost the plumber.
All that said, The Two Ronnies perhaps say it better than anything:
Specialist brokers: Paracetamol for your Contractor Mortgage migraine
Again, this is similar to what happens even in contractor-friendly High Street lenders. Advisers assume based on their training and how they interpret your situation. Contractor mortgages are so seldom asked for, staff are unaware that the bank has a separate policy.
Even if they are, it’s often easier for them to refer a client to a specialist mortgage broker. Or at least to someone who understands the documentation their senior underwriter can use! Either that or outright rejection.
So, there you have it. It’s not your fault that most mortgage lenders cannot see the benefits or worth of your contract. In fairness, it’s not always theirs, either.
But it is our duty to explain why you keep running head on into a brick wall. And to explain how you can prevent the headache of trying to get contractor mortgages direct.
I think it fair to say, that’s our job done. If you want to know more, it’ll cost you a coffee, but it’ll be oh so worth it in the end…
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.