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Gary Boyack is back to tell us all we need to know about mortgages for Contractors.
Are there specific mortgages for contractors?
There’s no specific mortgage for contractors, but certain lenders may have strict criteria that need to be met for somebody who is a contractor.
There’s nothing set in stone for every lender as they each have their own individual criteria. As long as those are met, then contractors will get the mortgage.
Do all lenders give mortgages to contractors?
The majority of lenders will lend somebody who is a contractor, but it will depend on that specific lender’s criteria and the contractor’s situation.
How much can contractors borrow on a mortgage? Any differences?
There’s slight differences – lenders base the loan amount on affordability. And for contractors many lenders normally take your daily rate as the income. They would multiply that rate by the number of days you would work, by 46 weeks.
They choose 46 weeks because you won’t work the full 52 weeks in a year- you’ll have time off for holidays etc. So this averages out your annual income.
How do contractors get a mortgage?
A contractor applies just like everybody else, but they additionally need certain documentation. You might need to prove how long you’ve been a contractor, supply details of your current contract and confirm whether there have been any gaps between contracts. You will also need to supply proof of income.
How is a contractor’s income assessed for a mortgage?
How your income is assessed can depend on how you run your business. If you’re an employee contractor on PAYE, the lender will ask to see your payslips and P60.
If you’re a sole trader and a self employed contractor the majority of lenders will ask for a minimum of two years’ self assessment records, via SA302 forms. You might also need bank statements for the last three to four months showing that income coming in.
Or, if you have set up as a limited company contractor, then you will need two years’ accounts, bank statements and possibly tax calculations.
How do you strengthen your mortgage application as a contractor?
Having a good track record of contract work will strengthen your application – ideally with no large gaps. Lenders don’t want to see somebody who’s had a contract for three months, with a gap for six months and then another month’s contract.
You will ideally need at least a two year track record, either working as a contractor or being employed in that field.
What about contractors buying with another person?
Many contractors opt for a joint mortgage, and each applicant is assessed based on their employment status. So if you are buying with your partner, you will be assessed as a contractor, and if they are employed, they will be asked for payslips, bank statements etc.
The lender will also look at credit records for each of you.
How does it work with different kinds of contracts?
There are many different forms of contract work, including agency contracts, zero hours contracts and fixed term contracts. As a general rule, for a good mortgage offer you need a minimum of 12 to 24 months’ continuous contracts, including one that’s running at the moment.
There can be different things to consider in getting a good mortgage deal, so for advice and help in looking at all the options, just get in touch with us for an initial, no-obligation consultation.