What is a Contractor Mortgage?
Getting a mortgage as a contractor is possible but not always straightforward. It sometimes can be a bit of a headache. There are few lenders who cater to contractors, despite how popular self-employment has become over recent years. This can make finding information and actually obtaining a mortgage more difficult than it should be. Thankfully, there are lenders out there who are willing to work with contractors to help them achieve their mortgage as a first-time buyer.
Why getting a mortgage seems difficult
The standard bank mortgage has a set criterion for any first-time buyers looking to apply for a mortgage. This criterion does not include self-employed individuals like contractors. In fact, many mortgage lenders aren’t willing to deal with applicants that are contractors because they don’t fit into the neat little box that full-time applicants do.
With a full-time employee applicant, it’s easy to check their credit history and get the exact amount they earn per annum from their employer. As long as they have a 10% deposit (minimum), and are expected to be able to meet the repayment fees, full-time applicants are rarely told they can’t take out a mortgage.
For a contractor, the process is said to be more complicated, but that isn’t quite the truth of the matter.
Is it possible to get a mortgage as a contractor?
The short answer is yes. Being a contractor should not cause as much trouble now as it used to. As long as you have the right documentation, you’re up to date with your accounts, and you have a positive credit rating, there’s no real reason your mortgage application should be denied.
You are, however, more likely to be denied through a bank or building society, as opposed to seeking a mortgage through a specialist lender. Specialist financial lenders have a different approach to mortgages and will have dealt with similar applicants, like yourself, in the past.
A contractor can be defined in several ways:
- Self-employed contractor
- Sub-contractor
- A contracted agency worker
- Fixed-term contractor (with a history of other contracts)
- Contractor working under umbrella companies
- Professional contractor i.e. accountant or legal professional
- Contractor recently self-employed
What documentation do contractors need to apply?
To apply for a mortgage, any contractor should be aware that financial lenders all have their own policies. When in doubt, the best course of action you can take is to reach out to those lenders and request a list of documentation that you will need during your application process.
That said, there are several common pieces of documentation that are commonly asked for when a contractor applies for a mortgage.
- Up to three years of business accounts.
- Your end of year tax calculation from HMRC (again, up to three years’ worth).
- A copy of any of your current work contracts.
- Three months of bank statements, showing your income.
- Proof of address.
- Proof of identification.
The most important thing is proving your income as a contractor. For this you will usually be required to provide the following:
- 12 months contact/employment history
- Evidence of current/imminent contracts
As any form of contractor your stability can vary, and in the eyes of a lender you are deemed a higher risk.
So It Is Possible To Get A Mortgage as A Contractor?
While it may be a little more complex to get a mortgage as a contractor, the market is still very much open to you, especially as this type of work is becoming more popular when compared to full-time employment.
As with self-employed and freelance individuals regular mortgage products are available to you as a contractor. However, some will have a steadier income than others and there may be options that would fit better, such as offset or flexible mortgages.
Just like anyone else you will be assessed on criteria such as your credit score and history, your income and your affordability.
Every lender will have their own criteria and methods for assessing an application from a contractor, finding one that matches your individual circumstances is paramount.
As every case is different there is no one-fits-all option or answer. By speaking with an experienced and specialist mortgage advisor your application can be prepared to your individual needs and will be placed with a lender who matches your criteria.
Contact us at Online Mortgage Guru on 0345 3669799 or email us via info@theonlinemortgageguru.co.uk and we will put you in touch with a suitable specialist to handle your enquiry.
