With property prices continuing to rise, getting a big-enough mortgage for your purchase can be a challenge at the times. But for contractors it can be even more difficult. With many lenders having limited understanding of how day-rate contractors working across the IT, finance and constructions sectors are remunerated. If you don’t choose the ‘right’ lender. You may end up with a much smaller mortgage than you might otherwise have done.
The added complication of IR35 regulation, with the liability for contractor status shifting from the individual to the employer. Means high-street 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. Not every lender properly understands these varied income structures.
However, the good news for contractors looking for a mortgage is that the situation is improving. A growing number of lenders are realizing the demand from day-rate contractors for competitive mortgages. And are working hard to deliver solutions.
Contractor Mortgages
Some are enhancing their affordability criteria and considering contractors. With a minimum track record of one year’s employment within the same line of work. Down from the previous requirement of two years. Others will consider applications from contractors with only three months left on their contracts. Allowing them to borrow up to 48 times their weekly rate. It is also good to see bigger lenders such as Barclays getting in on the act. Offering competitive terms to contractors where previously they would not lend to them at all.
However, any contractor looking for a mortgage must use the right broker. Seeking advice from a whole-of-market broker such as AWS Private Finance can help. We know lenders which are prepared to use 100 per cent of gross income. Even if it is classed as commission and holiday, and will also take this into account before pension deductions. This can make a significant difference to the amount you can borrow.
Day rate Contractors
Many of our clients are remunerated via a day rate so we are used to sourcing lenders. Who will accept fixed-term contracts and pay slips showing the borrower’s salary in the form of basic pay and statements. We have arranged mortgages for a variety of day-rate contractor cases, including clients who only have a couple of months left on their existing contracts. So know which lenders to approach who will take the applicant’s experience and history into account. And understand that they will be able to secure a new contract once their existing one expires. Please get in touch for more information.
