If you are a contractor working across the IT, finance or construction industries, getting a mortgage can be tricky, owing to the added complication of IR35 regulation.
The result is that lenders have struggled with umbrella set-ups and what income to use. With contractors paid differently from employees, earning a day rate via a limited or umbrella company.
Subsequently, any contractor looking for a mortgage must use the right mortgage broker who is well versed with the rules and knows which lender to approach to get the best possible terms.
What does IR35 mean for contractors mortgages?
Lenders are scrutinizing contracts and income more closely than ever. The borrower could find themselves in a position when taxes is not properly accounted.
What specialist contractor mortgages are there?
Many high-street lenders do not properly understand contractor remuneration. Instead, they treat borrowers as self-employed, taking salary and dividends from the past two years’ accounts. This may not be a fair reflection of income, particularly. If a contractor has retained profits in their business and/or have been contracting for less than two years.
However, there are lenders offering specialist contractor mortgages if you know where to find them. These multiply the contractor’s day rate by the number of working days in the year to work out annual income. Some lenders will take as few as 36 weeks into account. While others will consider as many as 48 weeks’ income. This significantly impacts the size of mortgage. Which is why it is so important to seek advice when it comes to getting a contractor mortgage.
Seek advice – how AWS Private Finance can help
The introduction of IR35 means it is more important than ever that contractors seek mortgage advice from a whole-of-market broker such as AWS Private Finance.
We have plenty of experience in arranging contractor mortgages and can guide you through the process, ensuring you are prepared properly so that there are no nasty surprises when it comes to applying for a contractor mortgage. Please get in touch for more information.