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Contractor Mortgages

Bhavna from First Step Mortgages talks about mortgages for contractors.

What is a contractor mortgage?

If someone is not employed in a traditional employment type, with PAYE income, they have a contract directly with the company, they will be classed as a Contractor. A contractor mortgage is simply any product that welcomes this type of applicant.

Which banks give mortgages to contractors?

There are many banks that give mortgages to those working as a contractor, such as Halifax, NatWest, Barclays, Nationwide and many others.

How much can contractors borrow on a mortgage?

Some lenders may be willing to calculate the annual income on the basis of the contractor’s day-rate, though many require you to have a six to twelve months contract in place for this to be an option. In this case, lenders will take your daily rate, multiply it by the number of days you work per week, then calculate an annualised contract rate. They will also factor in any holliday’s or gaps between contracts, so most will assume you are 46 or 48 weeks.

How do contractors get a mortgage?

A Mortgage Broker can help you navigate different criteria for different Mortgage Lenders and help you secure a mortgage to achieve maximum borrowing.

How is a contractor’s income assessed for a mortgage?

Typically they use the average of the gross amount you were paid over the last three to six months. This figure is then analysed to give the lender indication of the amount you would expect to earn over the course of the year. You’re usually able to borrow around five times this figure.

How is mortgage affordability assessed for Limited Companies?

You will be treated as Self-Employed, if you are a Limited Company Director, and usually, you will need to provide a tax return for at least one year.

How do you strengthen your mortgage application as a contractor?

It’s crucial to see a Mortgage Broker so that your case can be packaged correctly for assessment by the underwriters. This can help you achieve maximum borrowing.

How do contractors buy jointly with another person?

Contractors can file jointly with their partners, parents or any other family member. They will be treated, jointly with the other person, whether they are employed or Self-Employed.

What documents does a contractor need to apply for a mortgage?

Somebody looking to apply for a standard mortgage would need to provide three to six months of payslips, bank statements, and some lenders ask for your contract as well.

How can a Mortgage Broker like First Step help, If I’m a contractor?

A Mortgage Broker can help you to find the best mortgage offer for your individual needs and circumstances. As a contractor, your income may be seen as less stable than someone who’s employed full time. We provide specialist mortgage advice for contractors and subcontractors to get the right mortgage for your needs.

Your home may be repossessed if you do not keep up repayments on a mortgage.