Contractor Mortgages Made Simple
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Contractor Mortgages Made Simple
Contractor Mortgages are just the same as for anyone else, just with a few differences to how lenders look at your income. There is a popular misconception that it is hard to get a mortgage if you are a contractor but in reality this is not true! There are millions of contractors in the UK and many of those people are homeowners with mortgages. All you need is the right advice from a broker who is an expert when it comes to how you get paid. s
This page is specifically for contractors. If you are a company director or sole trader we have special pages just for you.
What are Contractor Mortgages?
Well, technically there is no such thing as a “contractor mortgage” as most lenders will simply allow anyone to access their mortgage products. There are though, some lenders that are much better than others when it comes to helping contractors obtain mortgages.
How much Can I borrow on a mortgage if I am a contractor?
The amount you can borrow will depend on your income, just like for an employed person. The difference is how the lender looks at your income and what proof they need. Generally speaking though you can borrow the same as an employed person on the same income
What income can a contractor use for a mortgage:
Can I use my day rate to get a mortgage?
Yes you can! And this is usually the best thing to do. Some lenders will use the value of your actual contract which means they are using your full income just like if you were employed on the equivalent salary. This can really make a huge difference to the amount you can borrow as a contractor. This is because if you use your standard self employed income, your profit will be after all of your expenses so your earnings will look less.
What if I have a limited company for my contractor income?
This is ok too. In fact the same rules apply, you could use your salary and dividend income or even your company profit just like any other company director. But, you will most likely be better off using your contract income, whether that is a day rate, weekly rate or a total value, this is all ok with a selection of lenders.
How does an umbrella company affect me getting a contractor mortgage?
It need not affect you at all really! Not all lenders will be good for any sort of contractor, especially to use the whole contract value or day rate but there are some great, mainstream lenders that have criteria specifically aimed at contractors. There are also some lenders where it does not matter if you use an umbrella company.
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How long do you need to have been a contractor to get a mortgage?
This is the beauty of using your contractor income over just being self employed or a director! As a sole trader or director you will need 2 years history but this is not the case with a contractor. If you have less than this it does help if you have a history in the same line of work but it is not essential. Each lender is different but as a general rule there should be mortgage options for you if you have been contracting for as little as 12 months. You will generally need a certain amount of time left on your contract too, at least 6 months would be ideal. The longer you have been contracting the more options you will have.
What if I employ other people?
If you employ other people to work on the contract(s) then it is more likely that you will be treated as self employed or a company director by the mortgage lenders. This isn’t necessarily a problem, there are still plenty of options for you! You can find out more about mortgages for company directors here
Getting a mortgage if you have multiple contracts:
If you have more than one contract then it is also more likely that you will be treated as self employed or a director. The contractor specific criteria really is aimed at people or are a more traditional contractor for one organisation.
How does IR35 affect getting a mortgage as a contractor?
The good news is that it doesn’t really. There are still plenty of options if you are still a contractor after IR35 has been introduced. What it has meant is that there are less traditional contractors around and so the lenders criteria is not quite as vast as it used to be to cover many different types of contracting. But if you are still a contractor after IR35 and you need a mortgage then you need not worry.
How much can you borrow as a company director?
Lenders can be extremely generous for contractors when using the value of your contract. If you are on a day rate they will usually make a calculation to give an annual figure from this, allowing for some time off in the year. This will usually be a higher figure than if you are just using your net profit after expenses or dividends if you are a director.
Getting a mortgage for a CIS contractor:
The CIS scheme is getting increasingly more popular for trades and construction companies. It helps keep things simple for those who want to be self employed but not have to worry too much about the finer details of self employment! There are certainly lenders to go to as a CIS worker, you have to choose wisely though as some will want to see a whole years worth of pay slips but there are options for us to just average your last 3 months. So, be sure to speak to an expert to get the very best CIS options.
Getting a mortgage on a fixed term contract:
If you are employed but just for a fixed period or maybe working through an agency and you have your tax and National Insurance deducted, then you are generally treated as employed. However, if you are only on a short term or fixed period contract then you would generally expect to need to have at least 12 months history of doing that job or working through that agency. Providing you meet this criteria you will be able to access a mortgage just like any other employed person.
What documents do you need for a Contractor Mortgages?
If you are a contractor, chances are we are going to need copies of your contract. We may need your previous ones too so that we can show your history. If you have another contract due as well then that may also help. As with any application we will also need your bank statements and the bank statements showing your contractor income, it’s fine if it goes through your own Ltd company. Some contractors also get pay slips, keep these safe as we may ask for those too! Contractor Mortgages are suited for you.
How much deposit do you need if you are a company director?
There is no difference here technically, most lenders do not have a different minimum deposit if you are a contractor but some lenders are a little more cautious if you are so in some situations you may find yourself struggling with a smaller deposit if you do not know which lenders to go to.
The key to getting the best mortgage when you are a contractor:
Above all else, get prepared! Do your research early, speak to an adviser that knows how to look at your income and make sure your accountant has everything up to date for you. Get your contracts and pay slips ready then the mortgage application will be a breeze!
For more information on Contractor Mortgages, please Contact us
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