The low-key way of promoting our contractor mortgages service has kind of had the opposite effect that we’d intended. On the flip side, now that we’re dealing with hundreds of contractors a month, it’s pretty easy picking out the most common customer questions.
1. Could a contractor mortgage be better for me?
It can allow you to borrow more than a standard mortgage, which for a small business owner is restricted by salary plus any dividends drawn.
Contractor mortgages are based instead on your current contract rate, projected to an annual earnings total, with the tax planning option to draw a lower salary.
2. How much can I borrow?
Simply multiply your current contract payment rate by the number of days worked each week x 48 weeks. Multiply this total by 4.5 to give the mortgage offer you can generally expect. So, a contractor on £400 per day could potentially raise £432,000 to buy or remortgage a property.
There’s usually far less hassle too. Unlike high street lenders who expect two to three years’ accounts as proof of earnings, contract-based underwriting means you need only show your signed contract document, CV and three most recent bank statements.
3. As a new contractor, am I less likely to qualify?
No. We will be able to secure you a mortgage, even though you are a new starter, because we deal with senior mortgage underwriters at the lender’s head office It’s just one of the benefits of talking to us as Contractor Mortgage Specialists.
4. What if my current contract is coming to an end?
Dealing directly with senior level managers, we are in a better position to support your application. Most Lenders expect to see at least 4-6 weeks before your contract expires. However, with positive endorsement from your agency regarding the potential for renewal or extension, we can often gain some flexibility.
5. Not being permanently employed, will I need a bigger deposit?
Not at all. Even for 90% and 95% mortgages many lenders are offering competitive rates. If you can fund a larger deposit however, your interest payments will be lower.
6. How can I get around the proof-of-earnings problem?
With our help. At branch level, banks and building societies mostly view contractors as high risk applicants; so demand 3 years’ accounts to substantiate mortgage affordability. In your case, this evidence is unlikely to give an accurate picture of your income potential and mortgage affordability. As Contractor Mortgage specialists we’ve negotiated bespoke contract-based underwriting with mortgage providers to offer funds on the more realistic basis of your contract rate.
7. Are interest rates higher for contract workers
Not through us. Your mortgage rate will be set the same as any employee. Though the best rates are currently available with a higher deposit, it’s still possible to achieve rates below 3% with a deposit of 10% – subject to your having a good credit rating.
8. Is a self-certification mortgage an option?
They are no longer available, having been assessed and withdrawn by the FCA (formerly know as the FSA). Contract-based underwriting now offers you genuine mortgaging benefits and is better-suited to your employment status.
9. Why should I not just ask my bank for a mortgage?
By all means do. However, the clear benefit in our service is a specialist’s understanding of the frustrations and difficulties contractors go through when trying to secure a mortgage. Our experience of your work sector and the trusted links we’ve made with the senior underwriters for high street providers, ensures that your application will be dealt with in an unbiased and effective manner.
Consider this advantage carefully. A direct approach yourself, to the same lenders, could easily see you dealing with an advisor who doesn’t fully understand your contractor status. The default process will trigger a demand for three years’ accounts. If you are new to contracting, this could prove an impassable barrier to your hopes of a mortgage.
If that disappointment is not enough, do remember that every failed application on the high street adversely affects your credit history for the future. It’s a risk that you needn’t take.
10. How long does it take to get an agreement in principle?
We can usually get you an agreement in principle (AIP) within 24 hours of receiving your formal application. First though, we’ll need to see a copy of your signed contract to prepare a detailed summary and Key Facts illustration – so contact us immediately if you have that document. Processing your application usually takes 4 weeks. The AIP will give you bargaining power with estate agents too. Use our Contractor Mortgage Calculator to check your borrowing potential based on your contract rate.
11. What’s so great about your service?
The short answer is our word-of-mouth reputation. Referrals and testimonials from contractors, freelancers, their specialist accountants and professional bodies speak volumes about the quality and reliability of our service. It stems of course from the deep understanding we have reached of our client base and their requirements when looking for a mortgage.