Need a contractor mortgage but don’t want to deal with all the hassle? We are here to help you. Furthermore, we can get you a mortgage based solely on your contract rate.
Whether you are “on-” or “off-” payroll, a limited company, or an umbrella contractor, we can assist you. In this troubling time, everyone requires assistance in obtaining the most favourable mortgage arrangement for their income and situation. We might even surprise you with how much money you can get based on your contract day rate.
What is a Contractor Mortgage?
A contractor mortgage differs from a traditional mortgage only in terms of how a lender evaluates your income and loan eligibility. To assess your needs individually, the underwriter will forego standard assessment methods and instead rely on specific criteria.
How Mortgage Saving Experts Can Help You Get a Contractor Mortgage
If you’ve already visited a few traditional mortgage providers, you’ll have figured something out. Few banks and building societies are eager to work with limited company contractors unless they have been trading as a contractor for a minimum of 12 months.
There are contractor-friendly lenders out there, believe it or not. Chances are, you’ve already walked right into one.
But here’s the thing: there’s a catch. At the branch level, you won’t find underwriters who deal with payment structures like yours.
We’ll be able to present your mortgage application to one of those receptive lenders in a way we know works. Get in touch today to discuss your options.
Bypassing the High Street lending model
Few High Street lenders educate their call centre and branch staff on the subtleties of contracting. They won’t be able to store a simple accounting guide under their desk, either.
We’re not like branch employees or call centre agents. They can only use their own lending methods and conventional mortgage products.
However, most conventional financing criteria are ineffective for contractors, so why employ them? Simple. We don’t.
Instead, we take the time to get to know you and the way you work. We can then make your mortgage application appealing to underwriters, who are the ones who make the final decisions.
It’s critical to have a direct route to them and to understand what they’re looking for.
I’m guessing the advisers you’ve met have already requested a large number of accounting records. They’ve turned you down even after you’ve given them all they asked for, right?
I’m not surprised at all. Untrained building society or high-street bank employees have a preconceived notion about mortgage funding. They are well-versed in their system, calculations, and what to look for in a candidate. Anything outside of that remit is off the table.
The good news is that you can put away those limited company accounts. We don’t require them. We’re only interested in your most valuable asset: your contracted daily rate.
Access to High Street mortgage rates, zero payslips and accounts
Contractors can use our services for all types of trade methods and payment arrangements. There are numerous options, each with its own business plan and owner status. It makes no difference whether you run your own limited company or use a UK payroll umbrella. We understand how to evaluate your relevant earnings to make a credit decision.
Contractor accounts for a limited firm and/or umbrella payslips? They don’t accurately reflect your ability to repay your mortgage.
Your income is geared for tax efficiency by your accountant. It’s fine; it’s their job. However, the accounts that arise do not reflect your genuine discretionary income.
Our contract-based underwriting methodology eliminates the need for accounts and SA302s, which is even better news. Including retained profits in the calculation of a contractor’s genuine mortgage affordability is more accurate.
Why you’re better off basing mortgage affordability on a contract rate
We’ve sat at many tables with a variety of mortgage lenders and underwriters. What is our goal? To demonstrate how contract rates can be used to determine a contractor’s affordability.
The way the lenders work out how much you can borrow is based on your day rate, multiplied by 5 to give you a weekly rate, then most lenders multiply this figure by 46 to give you a fair figure as you may have tome off on holiday or gaps between contracts when you are not working or being paid.
Using your contract rate to get a bigger mortgage
You may be able to borrow a lot more money for a mortgage loan if you use your contract day rate rather than the amount you declare to the Inland revenue which can be lower. This is because that income has taken off all of your liabilities such as travel and staffing costs etc.
Working out how much you can borrow for a bespoke contractor mortgage
With this easy calculation, you can determine how much you have the ability to borrow:
- take your current contractor day rate.
- multiply that by the number of days you work per week (lenders use the default 5 days).
- then multiply that by 46 weeks, the number of weeks per year used to calculate your annual salary.
- finally, multiply that annual gross salary by 4.5 – 5.
- lenders use that “multiplier” to determine your true mortgage affordability.
Each lender has their own affordability assessment and as there are so many it’s difficult to know exactly where to go so why not get in touch so we can tell you what you need to know.
Extended potential borrowing example
Let’s apply that method to a contractor that earns £400 per day and works five days per week. They could borrow from £414000 to 460000 to buy a house using contract-based underwriting criteria. Yes, to that amount. This is how you can figure it out:
Take the £400 day rate × 5 (days worked per week) to work out a weekly wage. So, 5 × £400 = £2000.
Then multiply that × 46, the weeks worked per year to establish a ‘gross salary’. That’s £2000 × 46 = £92,000.
Finally, multiply £92,000 × 4.5 (affordability multiplier), giving you £414,000
Covid-19 and borrowing potential for Contractors
Many mortgage companies may ask if you have had any grants or assistance from the government and if so, how long ago was this and how did it impact your business. These are questioning the lenders will ask and if you have been badly affected by COVID then you may not be able to borrow as much as you require.
Get in touch and we would be pleased to discuss your options further
Documents a contractor needs to apply for a mortgage
Contract-based underwriting is all about simplicity. This efficiency is carried over to the documentation we want from you.
We’ll need copies of the following documents to present your contractor mortgage application to underwriters:
- the current contract, confirming your contract rate.
- last 3-6 months’ bank statements.
- proof of ID (passport, driving license)
- utility bills
It’s as easy as that.
Our extensive experience with lenders have required years of hard work and dedication. But it was well worth the effort. We’ve stripped down what qualifies as relevant contractor earnings for lending purposes.
There are no accounts or payslips. Your contract rate is used.
Need a Contractor Mortgage fast?
If you need a mortgage fast, then please feel free to get in touch as we know the lenders who will lend to you. This means we’ll be able to locate the ideal mortgage for your situation in half the time.
We can also help you with an “agreement-in-principle” if that’s what you need.
If you have an Agreement In principle the seller knows you are very serious at buying property and know you are agreed and ready to apply for your mortgage. It can also help to know how much you can borrow to buy a house. A limit can aid in the refinement of your search. If you need to get things moving quickly.
All of these possibilities are considered in our approach to contractor mortgages.
The most important thing is to make sure your mortgage broker properly presents your application. Only then will it bypass the front-desk workers in the branch and get straight to the decision-makers.
Our range of contractor mortgage products
There are many lenders and products available to you if you are a contractor and finding them is a minefield if you do not know where to look. Mortgage saving Experts do know where to look because it’s our job. It’s what we do
Whether you’re a first-time buyer, moving, or looking to refinance for a lower rate, we can assist you.
Contractor Mortgages tailored to your specific requirements
Mortgage Saving Experts specialises in providing mortgage advice and assistance to contractors and freelancers. Among our clientele are, but not limited to:
- IT Programmers to Business Analysts.
- Engineers to Telecom consultants.
- Management Consultants to Operational Risk Managers.
- Change Management to Marketing Consultants.
- Accountants, Actuaries, Architects, Surveyors, Oil & Gas Contractors, Doctors, Medics, Teachers
This is something you must consider when approaching most high-street mortgage providers. Their definition of “relevant earnings” for lending purposes is oversimplified.
We, on the other hand, deal with lenders who are familiar with the needs of contractors.
This gives us the ability to offer your application to senior underwriters directly. As a result, you can rest assured that they will consider your entire earning potential.
Yes, indeed! They will include in that sum company profits held for tax planning purposes.
Why choose Mortgage Saving Experts for your Contractor Mortgage?
Mortgage Saving Experts provides a straightforward and unbiased advice for all of your mortgage and insurance needs
We can find you the cheapest mortgages available given your circumstances
The benefits of using a specialist contractor mortgage broker
If any of the following appeal to you in your search for a competitive contractor mortgage, please get in touch:
- bespoke “contractor friendly” underwriting terms with several high street lenders.
- a single point of contact for your mortgage application.
- a proactive, tireless work ethic to ‘complete’ in the shortest possible time.
- mortgage application updates every step of the way.
- access to mortgage-related products, such as:
- tailored income protection.
- Relevant Life cover policy
- critical illness cover.
Over the years, we’ve helped contractors acquire hundreds of mortgages. They can attest that we are one of the best and most dependable specialised mortgage brokers. You’re welcome to take advantage of and benefit from our years of experience too.
What are the problems with securing a contractor mortgage?
What’s the solution?
We can help you in overcoming these obstacles and obtaining the best mortgage possible. Contractors are increasingly seen as reliable borrowers with a steady salary by lenders. Some lenders will calculate eligibility based on the contract rate rather than net profit, salary, or dividends. In other words, if you’re a contractor, you can obtain a mortgage depending on certain criteria of course.
Am I restricted to my SA302 or Limited Company Accounts?
Not in the least. While most lenders would require you to produce these as proof of income because you are officially self-employed, certain lenders may accept gross earnings based on their estimation of your current day rate.
This would undoubtedly improve your affordability to lenders who base their loan calculations on your self-employment income.
I have had some career breaks between contracts. Will I be able to get a mortgage?
Yes, possibly. Some lenders allow some gap between contracts; while having a consistent history is preferred, it is not always required. It all comes down to the lender’s requirements for your specific contract type and circumstances.
I also have some bad credit, can you help me?
Some lenders will consider credit file difficulties; however, some limitations may differ depending on your credit history. To avoid the disappointment of a mortgage rejection, contact us to discuss this further.
I have been told there is a minimum income criteria. Is that right?
Some lenders, but not all, have minimum income requirements for all types of contractors. As Mortgage Saving Experts are independent, we can use these lenders as well as many more to find the right mortgage for you.
I have recently changed my accountant and the way I submit my accounts. Will this change anything?
No. This does not matter because the amount of mortgage you can borrow is based upon your daily contract rate.
My contract is rolling, with no end date. I imagine this will cause problems.
Most lenders prefer a contract’s end date and remaining time, but it all depends on your circumstances, the type of contractual work you conduct, and your previous experience. When a contract is rolling, however, there may be options.
I also have BTL properties; can you help?
Yes. If you are purchasing a property to live in then this is fine with most lenders as long as they are self-financing.
Many lenders make their own judgment if your buy to let properties are self-financing and this varies from lender to lender but generally, it should not be a problem. Please get in touch to discuss this further.
I use the agencies umbrella payroll company. Will this be an issue?
Not necessarily, albeit the conditions vary from lender to lender and depend on the contract and what you do. It’s critical to apply to the correct lender if you’re using an umbrella company.
As I am not permanently employed, I am concerned about mortgage payments and what I can afford.
We’ll address this with you from the beginning of your mortgage journey, and we’ll never recommend that isn’t affordable, based on your contract employment. We will explore these issues with you in more detail, as our advisors are payment protection specialists.