Mortgages For Contractors

Mortgages for Contractors Blog

Finding the perfect mortgage can be challenging for anyone. If you are looking for a contractor mortgage it can often feel like the odds are stacked against you even more than usual. High street lenders will usually base a contractor’s mortgage on their company accounts. But this doesn’t always reflect how much they really earn, leaving many contractors unable to purchase their dream home.

The difficulty lies in knowing what banks and building societies are looking for in a borrower. They like to make low risk loans – ones they feel confident will be paid back in monthly installments with ease. Lenders worry that contractors will struggle to afford their monthly payments when their current contract comes to an end. It’s an understandable concept, but often harsh in reality.

To help contractors get the mortgage they want, we’ve put together five tips to get back on a level footing.

1. Use A Whole of Market Contractor Mortgage Specialist

A contractor mortgage needs a contractor mortgage specialist. Lenders design mortgage products for different types of people and circumstances. The last thing you want is to research and apply for a mortgage only to find you don’t qualify or meet the circumstances set by your chosen lender.

Speaking to an independent mortgage broker, also known as a mortgage advisor, who has specialist in-depth knowledge of the market means they will be able to look at a range of mortgage products that match your individual requirements.

Speak to a few of them and ask what type of mortgage advisor they are. There are three main types of mortgage advisor;

  1. Those that advise from the whole of the market
  2. Those that advise from a limited number of mortgage lenders i.e. a panel
  3. Those that only advise on the mortgages of a single lender

If you want options from the widest possible range of products make sure your advisor is whole of market. The advisor will check your overall finances to make sure you can afford a mortgage. For example, checking to see how a change in interest rate might affect your mortgage payments.

An advisor with experience and whole market access may also have access to exclusive deals, not otherwise available. A good mortgage advisor will recommend a mortgage that is suitable, meets your individual requirements and will tell you which ones you are likely to get.

GIGLY only works with independent financial advisors (IFAs) who are regulated by the Financial Conduct Authority (FCA), advise from the whole of the market and recognise the specialist requirements of a contractor. Provided you can supply the documents outlined at the bottom of this blog, they will be able to recommend a mortgage that meets your specific circumstances.

2. Aim for A 10% Deposit

Sadly, the 100% mortgage is now just a distant memory and the best rates are now made available to those with larger deposits. A 10-20% deposit is ideal – manageable in the short and long term.

If you can not manage this level of deposit, or if you don’t own an existing property that is worth more than you paid for it, then are there are still mortgages out there, so don’t worry. You may may have to pay a higher rate for it, but it is possible. The more equity you can put in to a new property deposit, the less risk your lender is taking, so they are more likely to offer you a lower rate with smaller monthly repayments.

3. Keep That Credit Score Sparkling

We would recommend this to anyone applying for a mortgage. It’s so, so important. A poor credit rating can end a mortgage application, even if you have a good income and sizeable deposit.

Lenders want to feel confident that you won’t default on your repayments, so keeping your credit score in top condition will reassure them. Make sure you update the electoral roll when you move home, keep up other payments (credit card, car, etc).

For more tips on improving your credit score, read our blog.

4. Ensure Your Contract Is Up To Date

A copy of your contract is one of the documents you will have to supply to lenders, so you should make sure it is up to date. It must clearly state the length of your contract, and your current rate. This will give lenders a sense of how financially stable you are, and for how long.

5. Avoid Breaks In Contracting

One of the many attractions of the contractor lifestyle is the ability to take long breaks for holidays when you choose. Sounds amazing. But if they exceed over eight weeks over a twelve month period, it might set lenders on edge.

Most lenders look for a 12-24 month employment or contracting track record with no more than eight weeks between each contract. They want to see long term stability in your earnings. Some lenders view contractors as inherently risky propositions for a mortgage, but a good track record will encourage them to take a calculated risk. You might also benefit from a better deal if you can prove a solid track record.

If you are a new contractor without much of a track record, don’t panic. There are lenders out there who will offer first-time contractors competitive mortgage deals.

What Documents Do I Need?

  1. A copy of your current contract
  2. 3 months worth of personal bank statements
  3. Proof of Deposit (Bank statement showing the funds to use)

If you’d like more information on how to get a contractor mortgage please get in touch with us here. GIGLY only works with independent IFAs who advise from the whole of the market and who always put the gigger first.

Call our expert independent financial advisers now!

Call 020 3582 6091 or 0141 465 7632.
Open 7 days a week until 8pm weekdays.

Photo by Hugo Sousa on Unsplash