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Getting a mortgage when you’re a contractor isn’t quite the impossible task that many people are led to believe, and there are some tall tales floating about with regards to what your obstacles are.
Here, Jamie Challis (Head of Crunch Mortgages) reveals the five biggest myths that contractors wrongly believe apply to them when talking about getting a mortgage.
Plus, we give some great tips on how to get that elusive mortgage, and how we can help.
Contrary to popular belief, contractors can actually get a mortgage based on their day-rate.
Crunch Mortgages work closely with contractor-friendly lenders, and this enables us to arrange a mortgage based on your current contract, rather than the number of years you’ve been working as a contractor.
Our specialist lenders can help – even if you’ve only just taken the leap from a permanent position and have been contracting for as little as one day.
Contractors aren’t viewed as a high risk any more than a full-time employee. A contractor will be assessed in the same way as an employee; your self-employed status won’t hold you back.
Of course, having a large deposit will mean you represent less of a risk for mortgage lenders, and it’s natural to expect a more competitive mortgage deal with a bigger deposit. However, you can put down as little as 5% and still be positively assessed for a mortgage.
As a contractor, you may even receive lower mortgage rates if you’re in a better position to put more savings aside and can provide a larger deposit.
If you’re looking for more reassurance, this recent webinar gives detailed tips on getting a mortgage as a contractor, freelancer or limited company director.
If you have further questions, you may be interested in reading the self-employed mortgages Q&A which took place after the webinar, in which Jamie answered questions from people just like you.
A: Contact us initially to discuss your circumstances and we can then tailor some mortgage options for you.
A: Yes, the mortgage would need to be in your personal name. It’s possible to buy investment property via a limited company, but this would tend to require a special purpose limited company to be set up purely for the owning of the let properties.
A: A three month contract isn’t necessarily an issue. The lender will look at your overall experience. If you have two years experience within the industry, a three month contract can be accepted. As a minimum, your income should equate to £75,000 or more based over 48 weeks of your contract rate.
A: The minimum mortgage term you can take will be five years, and it’s quite common to take this for home improvement.
A: There are other lenders who can consider ex-council flats. The key criteria will be how long your contract is for. As a minimum, you’d need another six months of contract to remain so that we have a 12 months continuous contracting period.
A: If you’re working on a freelance basis, this will impact on your ability to qualify for a mortgage, until you have at least one year of finalised company accounts. However, in this instance we’d generally look at switching products with your existing mortgage lender – this can generally be done without the lender having to consider your income situation.
A: This does not impact on the mortgage at all – we can factor in many different forms of income – contractor, self-employed, employed, etc. In terms of exclusive products – these rates aren’t just limited to contractors – they’re available to self-employed and employed clients too.
A: We’d need to approach this from a self-employed income basis, looking at your accounts & Self Assessment income verification. As a minimum, you’d require 12 months finalised accounts available.
A: Most lenders will consider your salary plus dividends as your total earnings.
A: A bigger deposit certainly helps. You’ll obtain better interest rates with a bigger deposit.
A: It’s not advisable in taking an extended break when considering applying for a mortgage. If not in a contract, we would have to base all lending on only one of your incomes.
A: Potentially as soon as the new contract starts. We’d need to gather more detail to answer this fully.
If you’re looking for some more information on getting a mortgage as a freelancer, contractor or small business, check out our helpful checklist: Getting a mortgage when you’re self-employed.
If you have any further questions, don’t hesitate to get in touch with us at Crunch Mortgages.