Dispelling the Common Myths of Contractor Mortgaging
Regardless of whether you are new to contracting or a seasoned pro, there always seems to be someone out there who has a list of reasons why you won’t be able to get a mortgage.
Underwriting at mortgage Lenders has moved on significantly in the last few years. Of course, there are still occasions where funding is not available but more and more contractors have access to competitive lending options.
Find out how much you can borrow: https://www.professionalcontractormortgages.co.uk/homepage-umbrellacouk/
Professional Contractor Mortgages have been looking at some of the contractor mortgage myths, still doing the rounds:
As a contractor, you are deemed a higher risk and therefore charged a higher interest rate - Myth.
Provided you are presented correctly there are several High Street Lenders who are comfortable working with contractors. Once a Lender has been sourced, the mortgage scheme and rate you would have access to is the same as if you were permanent staff.
As a contractor, you will need to put down a bigger deposit - Myth.
Whilst putting down a larger deposit generally gives you access to lower rates, contractors are able to borrow with the same deposit levels as those in permanent employment. Most Lenders will offer options with deposits as low as 5% but a discussion with a Broker is key to decide what is best for you.
As a contractor, you need to have at least 12 months of contracting history and 3 months remaining on your current assignment - Myth.
There are options available from day one of your contracting career. Quite often sector experience is more important than how long you have been contracting. When it comes to term remaining on a contract, this could be a little as 1 month, but everything is assessed on a bespoke basis. We would always advise you engage with a specialist contractor broker as early in the process as possible to understand how your personal situation will be assessed.
As a limited company contractor, you need to be able to demonstrate 3 years of company accounts to get a mortgage - Myth.
If a lender was assessing you, as self-employed then it would be highly likely that affordability would be assessed on your company accounts. Most Lenders will look for a track record of 2-3 years and look at averages of your taxable income e.g., salary and dividends. A contractor friendly Lender will be willing to look at your ability to service the mortgage debt based on the value of the contract being worked.
Contractor mortgage applications take a lot longer - Myth.
The time taken for any mortgage application is based on two factors. How well the application is presented to the Lender and the Lender's turnaround times. A specialist Broker will ensure all the hard work is done before the application is sent to the Lender. The correct Lender will have been chosen, all the required documents would be gathered and pre-agreement would be gained before the application is submitted. We often find our applications are quicker than those who are permanently employed.
To find out more visit https://www.professionalcontractormortgages.co.uk/homepage-umbrellacouk/ or call the team on 02394 212912.