Getting a mortgage can be challenging for Contractor & Self-employed professionals. Here’s how our specialty Contractor Mortgage Brokering services can help.
Contractor Mortgages Available For:
- Contractors with active contracts (in almost every industry and sector)
- Self-employed professionals
- Freelancers operating as sole traders (usually regarded as ‘self-employed professionals’)
- Contract workers working with governmental/charitable organisations
- Limited companies/partnerships
Buying a house is one of the most important personal and financial milestones in one’s life. Given the high stakes involved in the process, it’s understandable why both lenders and borrowers like to play it safe – and that’s exactly where many contractors/self-employed professionals feel they lose out.
It’s not very uncommon for contract workers to see their mortgage applications turned down. If you’re in that boat right now, it’s important to understand that such rejections are hardly a judgment on your financial health. With the right advice and directions, you can easily overcome these minor obstacles to get the mortgage that your earning potential deserves.
Commercial Finance Network, a leading whole of market broker in the UK, helps you connect with lenders who specialise in contractor mortgages, thereby immensely improving your chance of getting approved. Read on to know more about our contractor mortgage broking services.
What Are Contractor Mortgages?
‘Contractor mortgage’ is an umbrella term that is often used to describe mortgages given out to self-employed professionals and contract workers. Essentially, mortgages for homebuyers who aren’t ‘employed’ in the traditional sense of the word are contractor mortgages.
While these mortgages are similar to other mortgages, there exist a few differences when it comes to how the lenders assess each case.
Who Is Eligible For Contractor/Self-Employed Mortgages?
There are no eligibility criteria set in stone for such mortgages – it all eventually depends on the lender’s discretion and policies. For starters, we can define, albeit loosely, what the term ‘contractor’ means in this context.
You’re eligible for contractor mortgages if:
- You are a self-employed contractor who offers services to an external company on a contract basis, or
- You are an employed contractor who has in place a fixed contract.
Broad Eligibility Criteria For Contractor Mortgages
Some of the following eligibility criteria are used by lenders on our panel. Remember that these are just tentative guidelines and the actual eligibility criteria will vary from one lender to another:
- Your experience in the industry
- The nature of your industry and services/products
- The history of your past contracts (renewals/terminations/extensions)
- The nature of your active contract(s)
- The length of time left on your active contract(s)
- The sustainability of your income
- The continuity of your contracts
- Your affordability (earning potential minus the outgoings)
How Much Can A Contractor Borrow?
If your professional profile and experience match the lender’s expectation, you can usually borrow the 60-95% LTV on your mortgage. As usual, you will be required to deposit the remainder to be able to borrow. Typically, contractor mortgages are capped at £500,000 by lenders. If you can prove your earning potential to be deserving of higher amounts, some lenders may be willing to up this ceiling.
As a rule of thumb, we can assume that you can get up to 400% of your annualised income on a contractor mortgage (provided that the lender is happy with the other aspects of your application). This, in our experience, is adequate for most contractors, given the average investment levels are comfortably below £300,000.
An Important Question – How Much Contracting Experience Do You Need For Contractor Mortgages?
Again, there are no set rules for this. It goes without saying that the more the experience, the better will be your chance of getting approved.
Lenders will invariably check your financial history along with your credit file before deciding on your application. Therefore, it’s always advisable to have a minimum of 2 years’ worth of experience at your disposal.
Note: Some lenders may still be willing to consider you application if you’re a self-employed/employed contractor with little to no experience, if you can raise higher deposit and have satisfactory professional/academic credentials.
How Do Lenders Calculate Contractor Affordability?
The affordability usually turns out to be the decisive factor.
The most common way lenders calculate the affordability is by annualising your earnings. An easy way of doing this is by calculating your average annual income over the past 3-4 years. For example, if you’ve made £50,000, £60,000 and £55,000 in the past three years, lenders will treat your application with an assumption that you earn £55,000 on average.
This, however, changes when your annual income varies drastically from one year to the other. In such cases, lenders will take into account your lowest income year as the benchmark.
What If You Have Recently Started Working As A Contractor?
There shouldn’t be any issues, as long as your credit file is healthy.
If you don’t have a history of contracting, lenders may ask you to provide you contract details along with your day rate (if applicable). These, when put together, will be used to calculate your annual earnings.
Important: Your Outgoings Matter, Too!
The affordability will also depend upon how your outgoings stack up. Common factors include:
- The number of dependent family members
- Childcare/education costs
- Existing loans and corresponding repayment streams
- Average monthly expenses on lifestyle
- Any other significant outgoings (medical bills, utilities, business expenses etc.)
Why Commercial Finance Network?
Contractor mortgages are specialist finance products – the ones local high-street brokers usually don’t know how to handle. There are dozens of considerations to make before you approach a lender, and a failed application will only hurt your credit score and inevitably prolong your ability to obtain a mortgage.
As a result, it becomes important to have an experienced whole of market broker on your side – and that’s where we come in.
“Commercial Finance Network connects you with lenders who have a history of approving applications similar to yours. This, when coupled with our track record of producing quotes that feature competitive interest rates at high LTV, explains why contractors across the UK choose us, every week.”
Here are a few reasons that have made us a UK commercial finance industry leader:
- We bring with us 10+ years’ worth of invaluable experience and an illustrious track record.
- Our panel of lenders consists of specialist lenders who know how to judge each contractor mortgage application fairly. This gives you a great shot at getting approved.
- High LTV and some of the lowest interest rates going around mean that you get to borrow a sufficiently large amount to fund your dreams.
- Every single contractor mortgage application we receive is decided upon within 24 hours!
- Our industry-leading “WiiN” customer portal lets you track the progress of your application as it moves through stages. As our valued customer, you’ll always be in charge of things.
How To Apply For A Contractor Mortgage?
It couldn’t be easier.
- Step 1: Complete this short enquiry form to let us know more about you (it takes just 1 minute). You can also call us on 03303 112 646.
- Step 2: Track your application live on our customer portal (our representative will explain how).
- Step 3: If approved, receive mortgage quotes within 24 hours.
Get On The Property Ladder With A Mortgage That Suits Your Needs
When you choose from ready made contractor mortgages, you invariably end up paying tens of thousands of pounds more, in the long run. A customised contractor mortgage from a specialist lender is the way to go – and we’re here to help you with that.