Posted by John Yerou
on May 17th, 2013 07:00am in
Last Updated on February 10th, 2019 15:09pm.
There’s been a ground-breaking shift on the High Street this week as the Halifax welcomed contractors outside the IT sector into its mortgage fold.
Banks and building societies recognising that contractors don’t have to be servicing computer systems to command a livable self-employed wage has been a long time coming.
But now, as long as your day rate fits the bill, you can at least get around the table with a mortgage advisor, a supposition thought laughable prior to this landmark decision.
You don’t even need to provide two years worth of historical self-employed income to plead your case, either.
That’s another huge barrier that freelancers faced in the past to prove their mortgageworthiness transcended.
What changed for Halifax in the contractor mortgage sector?
Of all the High Street lenders, Halifax has been one of the more consistent in offering mortgages to IT contractors against the backdrop of the global economic woes.
As the world and his dog rush to get a sizeable online presence, it’s always been assumed that wherever there’s a need for social presence, there’s the need for an IT guy.
Given the depth of knowledge generally associated with running a server and keeping corporations up to date with the latest operating systems, IT contractors rates have made them creditworthy, perhaps moreso than their contractually-employed counterparts.
But the global workforce is becoming a more flexible beast. Contrary to Yahoo!’s controversial decision to reign in its staff back to the offices, the remote workforce is otherwise gaining volume.
The forecasters reckon that, by 2020, 70% of the US workforce will be self-employed. Given the UK’s penchant for following in American footsteps, we’ll not be far behind.
Halifax spokesperson Ian Wilson remarked as such as the announcement was made. He called the opening of its doors to contractors from all niches “…a natural step forward”.
Contractors nationwide welcome Halifax mortgage decision
The widening of its policy has been welcomed by the contracting world, as one would expect. However, the foot-in-the-door day rate to get you around the table with a Halifax mortgage advisor is quite steep.
A part-time copywriter or self-employed person working for minimum wage via a recruitment agency, for example, would in no way meet the minimum £300 per day minimum the Halifax is demanding to open contractor mortgage negotiations.
But for those who do command that fee, with the dispensation of earnings history there’s nothing stopping them securing a mortgage with their very first self-employed engagement.
How much can a contractor borrow?
The maximum mortgage a contractor could secure on the minimum £300/day rate required would be £360,000.
This is calculated in an extremely straightforward manner. Your weekly rate of £1,500 (5 x £300) is multiplied by 48 weeks to give a gross annual salary of £72,000.
That gross figure is then multiplied by five, yes five, to provide you with the maximum you could borrow to secure your contractor mortgage.
Whether other mortgage lenders follow suit, we’ll have to wait and see. In the meantime, the light at the end of the tunnel has at last started to grow a little brighter.
Author: John Yerou
John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.