If you are a contractor and are looking for a mortgage, you can still apply for the same range of mortgages as people in employment. However, because of the various ways that lenders classify different types of contractors, applying for a mortgage if you are a contractor can sometimes present challenges. Regardless of what type of contractor you are – whether it’s self-employed, sub-contractor, fixed-term, or agency – you’ll still need to prove to your mortgage lender that you have a regular income and can meet their affordability criteria.
You can do this by providing as much evidence as possible of the income you’ve gained for the contracts you’ve secured, or how your income has grown in the time that you’ve been operating as a contractor.
What is a contractor mortgage?
While contractor mortgages don’t really exist – you are still applying for regular mortgages but will just have to meet different lending criteria – getting a mortgage as a contractor may prove tricky.
Most lenders will require you to provide compelling evidence of your ability to afford and repay your mortgage. Up until 2014, you could have simply certified your income to your lender yourself, without having to provide any documentation or evidence. However, so-called ‘self-cert’ mortgages were outlawed due to concerns that borrowers were taking on mortgages that they couldn’t afford to repay.
Now, if you are a contractor and are applying for a self-employed mortgage, you will be required to provide at least 12 months’ trading history to your lender, who will use this to calculate your affordability, based on the income you’ve declared and whether they think it will be sustainable over the full term of the mortgage.
It’s important to remember that different lenders have different rules, so working with an expert mortgage broker will ensure you get the right advice to help you get ready prior to submitting your application.
How do mortgages for contractors work?
Applying for a contractor mortgage is a relatively straightforward process. While you’ll still have access to the same lenders and mortgage products as everyone else, you’ll just need to prove your income in a different way. All that lenders are interested in is your ability to pay.
So, even as a contractor, provided you can meet the lender’s criteria, you’ll be eligible for the same mortgage rates as anyone else. However, there may be certain circumstances where a bit of specialist support is needed. For example, if you don’t have a long trading history as a contractor, work on short-term or short-notice contracts, or if you have had credit problems in the past, either at work or in your personal life, these can all have an impact on the way lenders will view your risk profile.
In cases like this, My Mortgage Pro can connect you with an expert mortgage broker who specialises in mortgages for contractors and can ensure you get the right advice to help you get ready prior to submitting your application.
Can I get a mortgage for contractors?
If you are a contractor, you can still get access to the same range of mortgages as anyone else. In fact, if you can prove you have a stable, long-term income as a contractor, you may even be able to get access to the best interest rates and deals on the market. It all depends on your personal circumstances. It is possible to get a mortgage as a contractor, provided you can demonstrate to the lender that you can afford the repayments and can manage your finances sensibly.
This means proving you’ve got a steady income, but also doing things like making sure you’ve met any other outstanding credit or loan payments on time, ensuring all of your regular outgoings – such as utility bills and credit cards – are paid on time, and not taking on any new debt.
Also, the more money you have for a deposit, the better, as this will help to bring down the total amount you need to borrow and might even help you to get a better mortgage interest rate.
Contact us for more information about mortgages for contractors
My Mortgage Pro is a professional mortgage information service. While we don’t give advice, we aim to provide you with simple, jargon-free, no-nonsense information about mortgages for contractors to help you make the right choice. We can also connect you with a specially selected panel of leading mortgage advisers, who are authorised and regulated by the Financial Conduct Authority, who will provide advice tailored to your specific circumstances and help you find the right contractor mortgage, fast.
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