Contractor Mortgages
If you work as a contractor, you may find it more challenging to get a mortgage than you would if you work in a full time, permanent role. The reason for this is that your income may be a bit less reliable as contractor work is usually not guaranteed.
There may be spells when you don’t have any work, although your income is likely to be higher than that of a permanent employee. Mortgage lenders tend to be more willing to lend to those who are lower risk but is certainly not impossible to get a mortgage as a contractor.
At Finance Surgery, we work with lenders who offer mortgages for contractors and our advisors will assess your situation and provide you with options, based on your circumstances. If you need help with getting a contractor’s mortgage, we are here to support your application.
Contractors are all defined differently, depending on the mortgage lender. If you are employed on a short term or fixed contract or you are self-employed, working with one main company, you would be eligible to apply for a contractor mortgage.
There are mortgage lenders who will only lend to those who fit one of these or both. You will need to speak to a mortgage lender who specifically lends to contractors, otherwise you may be rejected for a mortgage straight away. They will also be able to provide you with a variety of options to choose from.
Contractors don’t all fall under the one category and there are mortgages to suit different types of contractors. There are contractor mortgages for self employed people who are working for at least six months with the same client.
There are mortgages for contractors working on fixed or short-term contracts and for those working under an umbrella company, although you may need 12 months of working history.
Zero-hour contractors may also be applicable for a contractors mortgage if they have six months of working history. Agency workers can also be applicable for mortgages, if they have 12 months of steady working history.
As there are so many options to choose from, it might be difficult to know where to start. At Finance Surgery, we put you in contact with the right mortgage lenders based on your own individual circumstances.
It is important to get some specialist help when seeking a contractor mortgage. The reason for this is that specialists’ brokers understand more about contractors and how their income works and will be able to give you specialist advice on your mortgage.
If you work with a contractor mortgage broker, you will have much more options than you would with individual lenders. A mortgage broker will have access to a lot of different lenders, so you have more chance of getting a favourable answer.
The amount you can borrow for your mortgage will depend on the type of income you have, the mortgage calculator used by the mortgage lender and your affordability. The amount you can borrow will also depend on the type of contractor you are.
If you work as a PAYE contractor, the amount you can borrow will usually be assessed by your gross basic salary and any bonuses or overtime.
As a self-employed contractor, you may want to look at lenders who base the amount on your daily rate. Mortgage lenders are all different in what they offer, and some are more generous than others. Therefore a specialist contractor mortgage broker is a good way to approach the mortgage process, as they will work to find the right mortgage for you.
In most cases, if you are low risk, you can get a contractor mortgage with a 10% deposit. Low risk would mean that you don’t have a lot of outstanding debt and you haven’t defaulted on payments. If you are high risk, you can expect the deposit to be higher.
If you can prove to the mortgage lender that your contract has been renewed or you have been with the same client for 6 months +, it will be easier to get your mortgage with a deposit of 10%. However, if you are a higher risk contractor, the deposit could be 15-20%. Specialist lenders will vary in what they offer, depending on your situation and your affordability.
Market rates frequently change, but if you want to get good contractor mortgage rates, you will need to meet the eligibility requirements. It will also be worthwhile to speak to a specialised mortgage advisor who has experience with contractor mortgages.
This is where we can help at Finance Surgery. We know what mortgage lenders are looking for and we will try to make sure you speak to the right lenders based on your circumstances.
It is possible to get a buy to let mortgage when you work as a contractor. The mortgage lender is just interested in your ability to pay back the mortgage, so they will analyse various factors, including how long you have been in your contract, the total duration of the contract and your income.
If you fit the requirements of a buy to let mortgage, it is still possible to get a mortgage, even if you are working as a contractor. With buy to let mortgages, you will receive a loan which helps with paying your deposit. It is extremely helpful for those who find it difficult to get standard mortgages.
Help to buy mortgages are another government scheme to help borrower’s get a better chance of obtaining a mortgage. With the help to buy scheme, the government would provide an interest fee loan to help with the deposit.
You will only need to pay 5% and the rest of the deposit would be covered, although you would need to pay this back. It is possible to get a help to buy mortgage even if you are a contractor. Some mortgage lenders may have complicated restrictions in place though, so it is worth looking around.
A specialist advisor can give you different options to choose from, based on your circumstances and they know which mortgage lenders will be most likely to offer you a help to buy mortgage.
An offset mortgage is when you balance your savings against the balance of your mortgage. The mortgage and savings account will need to be with the same lender, in order to qualify for an offset mortgage.
As the balance of the savings account is offset against the balance of the mortgage, interest is only on the difference. Contractors usually look favourably on offset mortgages who have a good level of savings.
As you can pay more one month and less the next, it can be good for contractors who have variable levels of income. It may be more difficult to get an offset mortgage, but there are always options available., especially if you already have substantial savings.
It is important to speak to an advisor who can provide you with a range of options and this is what we can do at Finance Surgery. We know the mortgage lenders who are most likely to offer offset mortgages.
Contractor mortgages are a bit of a risk to mortgage lenders, so if you also add bad credit to the mix, it makes it even more complex. If you have proof that you have been working as a contractor for 12 months, especially with a consistent client, you will be more likely to get a contractor mortgage. If your bad credit is over two years old, this can also help your chances of obtaining a mortgage.
Some lenders are more lenient than others, so it is worth looking around to find the right option for you. The lender wants to be sure that you are in a position to pay the mortgage, so even if you have debt but you are making regular payments to it and you have a good income, they may be willing to look at your application.
We have been helping people obtain mortgages for contractors for years and we can help you too. We take every case individually and our mortgage advisors will help you find the right option to suit your needs.
We will assess your situation and ensure you get the right option for you. If you want to find the a good contractor mortgage, we can help. We want to ensure you get the good value for money and we will work with you to help you achieve results.
Although contractor mortgages are more challenging to get than standard mortgages, there are always options available and we are in a good place to provide you with plenty of options.
* https://www.which.co.uk/money/mortgages-and-property/mortgages/mortgages-and-deposits-the-basics/how-much-deposit-do-you-need-for-a-mortgage-acs1c3t6f9r0