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


Capped Rate Mortgages for Contractors

Capped rate mortgages are tied to the standard base rate of interest but which cannot go ever upwards and which are capped so they will not go over a pre-set level of interest and repayment. As such capped mortgages offer borrowers more security as they know their...

Tracker Mortgages for Contractors

Tracker mortgages are mortgages in which the interest rate on the mortgage is set at an agreed level above the standard base rate. The mortgage then tracks that base rate religiously. Doing so means that such mortgages are often much cheaper than standard variable...

Variable Rate Mortgages for Contractors

When sitting down to try and work out what type of contractor mortgage will suit you it is important to ensure you know the ins and outs of all the different products you will encounter. Variable rate mortgages are very common and consequently it is essential that you...

Discount Rate Mortgages for Contractors

As if all the different types of mortgage products for contractors weren’t confusing enough, people who decide to opt for a contractor variable rate mortgage then have a number of further choices to make as to what type of variable rate they want. As we have seen...

Offset Mortgages for Contractors

With savers struggling to find anywhere to put their money in the current economic climate, it is unsurprising that offset mortgages have been rising in popularity over the last couple of years. Offset mortgages were first launched back in 1994 in the UK but for a...

What are buy to let mortgages for contractors

Buy-To-Let mortgages for people contracting are once again growing in popularity as the economy shows the first signs of recovery and people look to invest their money once again. But with banks and building societies still offering measly returns on savings, people...

Fixed Rate Mortgages for Contractors

Introduction The term ‘Fixed Rate Mortgage’ is self-explanatory – it refers to mortgages in which the interest rate stays fixed throughout an agreed term. They are a way for people to guarantee their mortgage payment remains the same for a specific period of...

Calculating how much you can borrow

Though it is best to use a mortgage calculator to get a guideline indication of how much you can borrow, you can also make the calculation manually if you are not near a computer. For any individual who is looking to secure mortgage funding, the amount that you can...

Lenders Who Offer Contractor Mortgages

Over the last few years contractors setting out to find themselves a mortgage had to brace themselves for long and tedious debates with their bank manager as to why they were a good investment and why they should not be shunted over to higher interest...