In the decade since the 2008 financial crisis, mortgage deals have improved exponentially, however finding and being accepted for the ideal mortgage can be tricky due to the temporary nature of a contractor’s employment.
Whilst it may be slightly more difficult for contractors, it is certainly possible to get the best mortgage deal for them by following just a few tips. Take a look below as we explore our top ten tips for contractor mortgages.
Contractor mortgages
Ensure a great credit rating
It goes without saying that contractors, as well as anyone else seeking a mortgage, will need to show that they have a great credit rating, thus proving that they are a low risk borrower. For any contractor seeking a mortgage one of the most basic things that must be explored prior to a mortgage application process is to ensure your credit rating is up to scratch. However, if your credit rating is affected, don’t be deterred as Faraday Mortgage Associates can find a suitable lender to meet your needs.
Collate your paperwork
In addition to your CV, which will outline skills, experience and continuous work history, you will also need to take the following items to any mortgage lender when discussing potential deals: a copy of your current and previous contracts, items to evidence your earnings (bank statements, invoices, etc), business accounts if you are a limited company, as well as proof of identity (i.e. passport, driver’s licence).
Have realistic repayment limits
It is essential that you remain realistic when it comes to identifying the maximum repayments you can make on your mortgage each month. Therefore, once a lender has made a mortgage offer you must ensure that you can afford the repayments amongst your other monthly financial commitments.
Evidence of a sustainable income
One of the main reasons lenders are wary when it comes to giving mortgages to contractors is down to the fact that their career is built on temporary contracts. For lenders this could mean that income could change drastically once a contract comes to an end, running the risk that repayments will be missed. Lenders will often ask to see a copy of your current contract with day or hourly rate identified, as well as bank statements that prove a regular income stream that will cope with repayments.
Avoid lengthy contract breaks
Lenders will be on the lookout for a continuous work history from contractors, therefore we would highly recommend avoiding any extended breaks between completion of a contract and the commencement of another. If you do have any breaks in your working history, ensure that you provide details as to why this had occurred.
A bigger deposit will have a bigger impact
Whether contracting or in full-time employment, lenders like to see big deposits when it comes to assessing a person’s eligibility for a mortgage. Those with relatively large deposits of 10% or more will find that the process for being accepted is more often than not much quicker than those with the minimum of 5%.
Consider a mortgage that allows for overpayments
Often contractors find themselves in a lucrative contract, and it is at these times that it makes sense to pay off more of their mortgage (particularly if saving rates are low). If you believe this could be the case for your future contracting career then ensure you agree to a mortgage that allows overpayments without additional penalties.
Understand the additional fees involved
Many people fail to take into account the additional costs of buying a house, which can ultimately lead to serious financial strain. It is vital that you account for arrangement fees, legal fees, stamp duty, any broker’s fees and valuation fees prior to your mortgage search.
For first time buyers, don’t let this deter you
First time buyers, no matter which career, will find it much more difficult to get on the property ladder than others. This is of particular relevance to first time buyers and first time contractors as they will have very little evidence of a sustainable income. However, there are lenders out there that specialise in working with contractors and therefore are far more likely to approve you for a mortgage than regular high street lenders.
Get recommendations
For contractors registered with an umbrella company, it is highly likely that they will have a preferred list of suppliers for whom they recommend to contractors in a number of specialisms, from banking to insurance, health and safety to mortgage lenders. This is of particular benefit as mortgage lenders working with umbrella companies will ultimately have a great deal of experience in the contracting industry and will therefore understand how it works more clearly.
Here at Sterling Group we have worked with Faraday Mortgage Associates for a number of years. Mortgage experts that specialise in helping contractors to obtain the most suitable mortgage.
Are you in search of a reputable mortgage advisor? Get in touch with Faraday today to discover how they can help you to achieve the best possible mortgage deal. Call on 01925 62 62 62 or email advice@faradayonline.co.uk.
