Mortgages For Contractors
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Standard mortgage applications focus on borrowers with steady salaried income. If you are a Contractor, traditional lending often failed to consider true mortgage borrowing capacity for contractors. But with multiple mortgage options for you to explore mortgage for contractors should not be a impossible task.
What Is In This Guide?
This guide is dedicated to mortgages for contractor in the UK. It breaks down what you need to know to get a suitable mortgage deal from lenders who consider contractor day rate income or umbrella company income.
In this guide, we will focus on:
What is a contractor mortgages.
Contractor mortgage rates
How much contractor can borrow
What is the process of contractor mortgage
How to increase success chances for contractor mortgages
How MariannaFS can help with contractor mortgage.
What Is a Mortgage For Contractor ?
Being a contractor has its benefits, but when it comes to proving earned income for mortgage then it can be very complex. Working with correct lender for mortgage can make thing a lot simpler.
A contractor mortgage meaning mortgage lending based on a day rate or contract rate rather than using payslips or tax assessments. Term contractor applies to anyone trade as sole trader or limited company on fixed or short-term contracts and paid on day rate.
The mortgage for contractors lending will often base on the contract rate rather than traditional underwriting. Underwriting using day rate meaning borrowers can borrow a lot more.
Mortgages For Contractor Can Get A High-Street Rates?
Yes, absolutely, mortgages for contractors have access to high-street mortgage rates. The belief that they need to pay “specialist premiums” to buy properties is no longer relevant.
Major mortgage lenders like Halifax, Skipton, and NatWest, Bank of Ireland have established “contractor-friendly” policies to help mortgages for contractors.
If you meet lenders specific criteria (which is usually a good contracting track record or a high day rate), you can get a suitable mortgage deal at competitive interest rates. We have made a mortgage compare tool for mortgages for contractors, which can give you rates overview.
How Much Can You Borrow As Contractor Mortgage?
The biggest advantage of a contract-specific mortgage is contract-based underwriting. Here, mortgage lenders use your gross daily rate instead of payslips or profit from accounts.
Most lenders use a standard calculation formula to determine your annualized income:
Day Rate x 5 Days x 46 Weeks = Total Annual Income
(Please note that some lenders may use 48 weeks. 46 weeks is the conservative industry standard, allowing for holidays.)
Then, mortgage lenders generally apply a multiple of 4.75x to 5.5x to this total, giving you the amount you can borrow.
We have created a simple calculator for contractor mortgages. Please not that this is for guidance only.
Speak to our FCA authorised mortgage expert for more information.
What Mortgage Products Are Available For Contractor Mortgages ?
If you are a day rate contractor in IT or CIS contractor, no matter of what industry you work in as contractors have access to the same mortgage options as anyone else.
All mortgage lenders offers mortgage products including residential mortgages or buy-to-let mortgages to contractors. The key to success is meet specific lenders criteria when applying for mortgage.
How Does The Contractor Mortgage Application Process Work?
Ideally, the mortgage contractor application process involves the following steps:
Preparation:
Start by gathering your existing and previous contracts related information. Contractor mortgage broker can guide you on this
Agreement In Principle (AIP):
Get your AIP. This is a “soft check” that gives you an idea of what the lender is likely to offer.
Full Mortgage Application:
Once you finalised your property your trusted independent mortgage broker will work on your full application.
Underwriting:
Mortgage underwriter will review your contract history and employability before making lending decisions.
Offer:
After successful property valuation, the lender will make you a formal offer.
Success Tips For Contractor Mortgages
Before applying for contractor mortgage some of the tips mentioned below can help with mortgage underwriting.
Higher deposit:
one of the major factor about mortgage lending is deposit. Having higher deposit can improve chances of approval while securing best mortgage rates.
Up to date contracts:
Having up to date contracts with out any breaks can help to secure mortgages for contractor. It helps underwriter to understand history of contract, term of contract and income earned form contracts.
Avoid long breaks:
Having longer breaks in different contract can make it difficult for underwriter to establish income consistency. Avoid have breaks no more than 6-8 weeks.
Work on credit history:
Having a stronger credit history being a contractor can help to secure mortgage from high street lenders. Having poor credit history means specialist mortgage lenders can only lend which can be expensive option.
How MariannsFS Can Help With Contractor Mortgages
MariannaFS are team of independent mortgage brokers who are expert in mortgages for contractors. We understand the nuances of IR35, day-rate fluctuations, and limited company structures.
Our mortgage brokers have deep industry knowledge. While working on your mortgage requirements we will understand the contract history and income structure, which will help us to secure maximum lending with best mortgage rates.
Speak to our team to now how we can help mortgages for contactors.
Related guides
Contactor Mortgage Calculator
Mortgages For Company Directors
How to get self-employed mortgage?
Halifax 1 Year Self Employed Mortgage Guide
