There are without doubt plenty of benefits to being a Contractor, however, one of the major disadvantages is that it can be more difficult to obtain Mortgages and other types of finance.
As a Specialist Contractor Mortgages Broker and being truly whole-of-market, we can find solutions to even the most challenging of circumstances and offer the very Lowest Interest Rates and Maximum loan-to-value deals available.
We work with Contractors and Self-Employed persons to secure for them the best deals available for both Residential and Buy to Let Mortgages and save them considerable time and money in the process.
Mortgages for Self-Employed & Contractors
When you work on either a Self-Employer or Contractor basis, some lenders deem you to have less job security compared to someone who is a permanent full-time employee of a business, even though you may consistently be able to secure long-term contracts.
According to the Office of National Statistics, there were over 5 million self-employed people working in the UK at the end of 2019, with self-employed workers representing over 15% of employment.
The Covid-19 Pandemic has led to increased unemployment rates in the UK, including a significant impact of the self-employed sector, at the end of 2020, there were over 4.3 million self-employed workers in the UK (source: statista.com).
The percentage of self-employed workers and been steadily growing for many years, from 8% of UK workers in 1975 to 15% in 2019 (source: Institute for Fiscal Studies). As the UK economy recovers, the numbers of self-employed workers should regain momentum and it is expected that the numbers will start to increase again in the future. So, there is already a huge proportion of the UK workforce working on a self-employed basis and this should grow again once the economy starts to repair.
However, many lenders will not provide Mortgages to Contractors, or will not lend as much to a Contractor as they would to a permanent employee on the same salary.
Why is it difficult for Contractors to get a Mortgage?
As well as not having the perceived job security that a permanent employee has, a Contractor’s salary can vary significantly from one month to the next, and from one year to the next. Contractors are often paid based on a day rate, rather than an annual salary, which makes it more difficult to calculate their average annual earnings.
The way that Contractors’ earnings are worked out can be complicated as well, as many Contractors pay themselves a small salary and use dividends to boost their income. This is why it is easier for a Contractor to use a specialist broker to arrange their Mortgage, as a broker will find lenders who have different lending criteria for Contractors.
How do lenders decide whether to approve a Contractor Mortgage?
Just like with a standard Mortgage application, a lender will conduct an affordability assessment to calculate how much they are prepared to lend. Some lenders will request that they are provided with two, three or even five years of accounts from the Contractor to show their earnings, including how much they are paid in expenses. Other lenders may only request six months of accounts, this varies from one lender to another.
For Contractors who have been working on a Contractor basis for numerous years, it will usually be easier for lenders to determine how much they will lend to the applicant. They will generally work out the average earnings and base the maximum loan amount on this.
For Contractors that are on a day rate, a lender will usually estimate your annual income by multiplying your day rate by the number of days that you usually work. However, if you have only recently started working as a Contractor and do not have two to three years of accounts to show the lender, they may request evidence that would show that you are likely to succeed in a career as a Contractor.
This evidence could include qualifications in the field you will be working in or experience of the type of work you will be delivering. If you lack experience and qualifications in the field that you intend to work in as a Contractor, lenders will view this as a high risk and are less likely to offer you a Mortgage.
The average salary for a Contractor in the UK is £47,500 (source: cwjobs.co.uk) but this varies massively, as will the amount that lenders will be prepared to lend.
What can help to get a Contractor Mortgage approved?
There are numerous factors that will improve your chances of having a Contractor Mortgage agreed. Just like with a standard Mortgage, having a good credit score will help your chances of having a Mortgage approved.
You should check your credit score using one of the credit report agencies, as this will enable you to see if there are any credit issues that may affect your Mortgage application and give you chance to rectify some problems. If you wish, you can use our free Reducing any outstanding debt, such as credit cards or loans will also help and if you are not registered to vote at your current address, make sure that you are.
In addition to this, the bigger the deposit you are able to put down, the better, as this will reduce the risk that the lender will lose any money if you were unable to pay your Mortgage if you were out of work for a while.
Another way that you might be able to improve the likelihood of having a Contractor Mortgage application approved, is if you are able to provide evidence of long-term contracts with employers, or even evidence of previous long-term contracts you worked on. If the lender can see that you are regularly offered the types of contracts that will demonstrate affordability of the Mortgage, this should work in your favour.
One of the great benefits of working as a Contractor is that you can work on a long contract and then take some time off before your next contract, so you can have a long holiday or spend time with family, for example.
However, if you are looking to take out a Mortgage for Contractors in the near future, you should try to avoid taking any extended breaks, as this could affect the outcome of your application. It is better to have less time off in the lead up to your Mortgage application, so that you can demonstrate a higher average annual salary and so that you can show you are getting consistent contracts.
Another factor that can significantly boost your chances of being approved for a Mortgage as a Contractor, is if you are applying for a joint Mortgage and the other person has permanent, full-time employment, as the lender will usually be happier to offer you the joint Mortgage.
Choose a broker who specialises in Contractor Mortgages
Many high street lenders will decline Mortgages for Contractors who are unable to provide the required number of years’ worth of business accounts and some require up to 5 years of accounts. For many Contractors, this is not a possibility because they have not been working as a Contractor for a long enough period to provide accounts for the length required.
To mitigate this issue, the best option is to use a broker who specialises in Mortgages for Contractors, such as UK Mortgage Broker, who is able to find a Mortgage to suit the exact circumstances of the Contractor.
So, whether you get paid a day rate, an hourly rate or another type of payment, the whole-of-market broker is able to find the Mortgage deals that will work for your type of pay. For Contractors who have not got several years’ worth of accounts, UK Mortgage Broker is also able to find Mortgage deals that do not require accounts to be provided.
Finding the best Mortgage deals on the market
As experts in Contractor Mortgages, with many years of experience finding the right type of Mortgage for Contractors, we are able to search every available Mortgage product to suit the requirements of our clients.
Every Contractor’s working history and financial position is unique to them, which means that one particular deal could suit them, but another one would be better for another Contractor. We take all of relevant details into account to identify the best Mortgage deal that is available.
Why choose UK Mortgage Broker for Contractor Mortgages?
Each client is assigned their own dedicated Mortgage Advisor and Case Manager, who will be their points of contact throughout the Mortgage application process, available to answer any queries and provide regular updates.
Our innovative WiiN (Where Is It Now?) online portal provides our clients with 24/7 information regarding the progress of the application. So, even if you are working long days and are unavailable to talk during standard office hours, you will be able to see exactly where your application is up to at all times.
One of the most frustrating elements of applying for a Mortgage is chasing up where solicitors are up to and getting updates from lenders, but our unique WiiN portal takes all of that hassle away from you. You will receive notifications when tasks are completed and any actions that are required on your part will be flagged.
The portal helps to speed up the processing of the application, as every party receives alerts if an action is required and there are no delays due to not being able to contact people. As well as working more smoothly than most Mortgage applications that do not have the benefit of the WiiN portal, the applicant is required to do less chasing, which will save them significant amounts of time.
How much you are able to borrow will depend on your specific circumstances but by speaking to one of our expert Contractor Mortgage advisors, we will quickly be able to advise you on the best deal to meet your specific requirements.
What details are required for a Contractor Mortgage?
To speed the process up, it will help if you have as much information regarding your pay, business accounts and any outstanding loans or debt, so that we can immediately find the best Mortgage deal. Once we have an initial conversation, we will instantly get to work and find you a Contractor Mortgage deal that provides best value for money.
We are FCA Authorised and Regulated, with a wealth of experience in providing Contractors with the best Mortgage deals to suit their needs, so call us today to get started with your Contractor Mortgage application process.
Buy your dream home with a specialist Contractor Mortgage
It can be tempting to opt for the first Contractor Mortgage that you can find but if you want to ensure that your Mortgage payments are as low as possible, let our Contractor Mortgage experts find you the best deal available.
To find out more and speak to one of our Contractor Mortgage Experts, call us on 0333 0166 600. Alternatively, you can also fill in this short online form to get started. Our team of Contractor Mortgage experts will get back to you straight away.
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