6 tips for Securing Contractor Mortgages

Contractor Mortages

Whatever you might have heard, your choice to work as a contractor should not stop you getting a mortgage. However, because most high-street lenders don’t understand how you work, you might have to approach it in a different way. Here’s what you need to know about contractor mortgages.

Contractor Mortgages - What You Need to Know: Click here to download. 

Highstreet lenders might give you trouble

The staff in your local high-street branch expect to see conventional employment and could be thrown by anyone who doesn’t fit in to their narrow criteria. You might find it difficult to provide the evidence they ask for, and they might interpret your flexible working pattern as insecure. Many high-street lenders will either decline your application or offer more expensive rates, because they perceive the risk to be higher.

A specialist broker is your best bet for contractor mortgages

Ironically, with their highly marketable skills and experience in securing new work, a contractor’s income is often more secure than that of an employed person, but you’ll have no end of trouble convincing your high-street branch of this. However, a specialist contractor mortgage broker will have contacts at the lender who understand how the contractor market works and won’t be alarmed by a temporary contract. Using a specialist broker will give you access to the same range of deals offered to the conventionally employed, you won’t be asked for reams of impossible evidence and your application with usually run much more smoothly.

Save as much as you can

Whether you go through a broker or the high-street, your chance of success and the deal you’re offered will depend on the lender’s perception of the risk. One important factor in this is the loan to value. A £100,000 loan with a 30% deposit will receive different treatment to a 95% loan for £500,000.  The bigger the deposit you can save, the better you’ll do, so save as much as you possibly can.

Maintain a good credit rating

Your credit rating is another important factor in securing a mortgage and these days it’s easy to check it and take action, if necessary, to improve it. There are a number of free apps that help you check your credit score and alert you to any issues. However, there are a number of basic things anyone can do to protect or improve their credit rating.

  • Make sure you’re on the electoral register at the correct address.
  • Don’t miss any payments on utility bills or existing loans or credit cards. Missed payments can show up on your record for up to six years.
  • Use credit sensibly. Having no activity in your credit record can worry a lender too, so it’s a good idea to have some kind of credit. For example, you might have a credit card that you pay off every month.
  • Stay well within your limits. Large overdrafts and credit cards close to their limits might be seen as a warning sign, even if you never miss a payment or exceed the agreed limit.  

Know your limits

If you borrow right up to your limit, a temporary run of bad luck could leave you in real trouble. For example, if your current contract ended early, would you be able to cover the repayments? What if interest rates went up at the same time? It’s important that you base your calculations on a realistic assessment of what you can afford, and you don’t over-reach just because the lender will allow you to.

New contractors can still qualify

You might have heard that contractor mortgages need a proven track record and years of accounts to support them. While a track-record can be an advantage, contractor mortgages are still available to new contractors. Your specialist mortgage broker will be usually be able to secure a mortgage based on your current contract rate, and there will usually be no requirement to produce years of accounts.

Where to go for help

Because we’re aware that this issue affects a great many contractors, we’ve partnered with CMME, who specialise in contractor mortgages. CMME are one of the largest mortgage brokers in the UK, and because they have access to specialist underwriters who understand contracting, they can give you the best chance of securing the right mortgage. They’ll use their expertise and experience to find the best lender for you.

If you have any questions or if we can help in any way please contact our expert team on 01296 468 483 or email info@orangegenie.com.

 

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