Mortgages for Contractors
Mortgages for UK Contractors
For a long time one of the few downsides of striking out on your own and contracting was that the banks and other financial institutions appeared to look down on contractors as somehow less reliable or not worthy of a regular mortgage at regular rates. They would take one look at a contractor’s salary patterns (or lack thereof) and immediately peg them as too risky, despite the fact that most contractors were earning much, much more than their salaried counterparts. If people did not fit into the large deposit / monthly set income bracket then the lenders would immediately become confused, shake their heads and say no to a mortgage. Either that or they would offer them a self-certification mortgage at such prohibitively high rates of interest as to be both insulting and not worth taking on.
Thankfully, as more and more people have made the leap into contracting and working for themselves the banks have begun to realise what a valuable, and reliable sector contractors can be. Consequently contractors are now starting to see more and more mortgage products coming onto the market that are aimed specifically at them and their working style. That means they are finally being offered mortgages that are not restricted to the older monthly-salary style of regular employment and are open to a more holistic approach in assessing the credit-worthiness of an applicant. These new contractor mortgages are mortgages that have been built from the ground up specifically for contractors. They are normal rate (prime rate) mortgages except they have had some specialist underwriting to make them fit around the modern working style of contractors. This means that when it comes to assessing contract workers for their eligibility they will take into account factors such as the length of time the applicant has been working as a contractor, whether they have had any large gaps in work in that time, the retained profits of the contractor over that period and their annual rate of income rather than their monthly rates. Other factors that will be relevant include the rates they charge per contract, the duration of the contract they are currently employed on and the number of contracts they have lined up in the future.
The advantages of these types of contractor mortgages for both lender and contractor are clear. The banks and other financial institutions now have a product that appeals to a large (and growing) sector of the employment market – and one which is typically reliable and well-paid – whilst contractors now have access to a range of mortgage products that are not self-certification and which offer all of the freedoms (and more importantly low rates) of the high-street whilst also offering far broader eligibility requirements. Furthermore, these new contractor mortgages should cost little more as a run-of-the-mill high street mortgage as they are based on the same rates and same products underneath the hood. All that will differ is the underwriting of that mortgage and the broker who is selling it.
For contractors it is better to deal with a contractor-oriented broker who will have a wider knowledge of all the different products now available than someone working in a bank trying to sell that bank’s products. Indeed finding a good contractor mortgage broker can provide invaluable help in getting a mortgage. Not only will they be able to compare all the products on the market, they will also be able to walk contractors through every step of the application and help them get their accounts set out in the exact manner that the mortgage companies will be looking for