What is a contractor mortgage broker?
Contractor mortgages can be defined as mortgages for contractors who are self-employed. These mortgages are almost always complex in nature. This is due to the fact that the mortgage lender will find it difficult to figure out the contractors’ disposable income.
Most contractor workers will work od daily or weekly pay rates which may fluctuate throughout the year.
Contractors will often not be able to display a yearly salary or the minimum 3 years of accounts that most mortgage lenders will require.
Most mortgage lenders will Instead offer specialist mortgage products for contractors allow them to borrow money based purely on your contract rate. If your credit score is good (if it isn’t you should look to [build your credit](https://huuti.co.uk/Build-Credit.html)) and you fall into the low-risk category, you should be able to borrow at the same rate of interest as a PAYE employee.
Different mortgage lenders will have different definitions on who is an eligible contractor mortgage applicant and who isn’t.
Due to the complexities involved in contractor mortgages you should seek help from a contractor mortgage broker where possible.
Will you need a big mortgage deposit for a contractor mortgage?
For a contractor mortgage you will usually need to put a mortgage deposit of between 10 to 25% but to make things move smoother you should aim for a higher mortgage deposit of 25% which will reduce your loan to value(LTV) and lessen the risk for the mortgage lender. You contractor mortgage broker will be able to guide you further on this based on the panel of mortgage lenders they have available to them.
Do I need 3 years of accounts to get a contractor mortgage?
No, mortgage brokers have accepted 1 year of accounts and more although 3 years of accounts is usually a standard requirement by most mortgage lenders. Most mortgage lenders now have varying lending requirements so your contractor mortgage broker will be best suited to guide you on how many years of accounts you may need based on the mortgage lender.
Who could be eligible for a contractor mortgage?
Contractor mortgages could be right for anybody classified as a contractor. This could be:
- IT Programmers;
- Business Analysts;
- Telecom Consultants;
- Management Consultants;
- Operational Risk Management;
- Change Management;
- Marketing Consultants;
- Oil & Gas;
Getting a contractor mortgage could be difficult if:
- you do not have 3 years of accounts;
- You have been contracting for less than a year
- to minimise tax, you pay yourself a small salary and the rest in dividends
- you’re on your very first contract;
- Your rate differs per job
- You have irregular income and it is hard to prove
- your accounts are not reflective of your current position;
- your existing contract is due to expire in the next 3 months;
You should seek help from a contractor mortgage broker who could advise you on how best to navigate the queue of contractor mortgage issues.
What documents will you need for a contractor mortgage?
Your contractor mortgage broker will be able to guide you on the details the specific mortgage lender may require but typically the below are the standard requirements of a contractor mortgage.
- a signed copy of your contract;
- proof of identification;
- your CV;
- 3 months’ bank statements.
- Your annual accounts
- Your tax returns
What information would a contractor mortgage broker look for?
Your contractor mortgage broker will access your financials, your credit score and history but more often than not they will seek to understand the below information and how it could affect you after you get your contractor mortgage.
- How long you’ve worked in that industry
- If you have had contracts renewed before
- How long you have left on your contract
- The type of contractor you are
- How long you’ve been contracting for
- What your average rate is on your contract
There are different types of contractor mortgages in the UK They include:
- Self-employed contractors mortgage: Your contractor mortgage broker will likely inform you that you need a minimum 6 months contract for you to increase the likelihood of getting a contractor mortgage.
- Employed fixed/short term contractors mortgage: Your contractor mortgage broker will probably inform you that some previous history of working as a contractor is required by most contractor mortgage lenders.
- Umbrella company employees mortgage: Your contractor mortgage broker will probably inform you that most contractor mortgage lenders may require at least 12 months of working history.
- Zero hour contract workers mortgage: Your contractor mortgage broker will probably inform you that most contractor mortgage lenders may require at least 6 months of working history.
- Agency workers mortgage: Your contractor mortgage broker will probably inform you that most contractor mortgage lenders may require at least 12 months of working history.