Are there contractor friendly mortgage lenders?
Contractors are entrepreneurs, small business owners, often highly skilled in demand professionals able to command high fees from their clients but are often excluded from the mainstream mortgage market and its competitive deals because their income does not fit a standard model as defined by most high street lenders.
The good news is in recent times there has been a notable increase in contractor friendly lenders who adopt a flexible approach to underwriting, assessing each application on a case by case basis or even implementing specific assessment criteria for contractors.
Income and affordability calculations based on your contract rate
For instance, contractor friendly mortgage lenders will determine affordability based on the applicant’s current contract and use the daily contract rate to work out an annualised income, rather than the conventional method of evaluating the past three years of accounts and using that as a yardstick to future income.
These lenders may not be household names like the high street banks and building societies, many don't deal directly with the public, you're unlikely to see them advertising in the press or online, but they are backed up by an army of professional mortgage advisers such as ourselves who guide their clients to the right product from the right lender.
While many mainstream lenders generally look at things in black and white terms, specialist lenders have a more flexible approach. They are much less likely to operate an automated yes/no credit score decision making system. Instead they have experienced mortgage underwriters who look at each application on its merits, taking into consideration all aspects of the case. Lenders with a positive attitude towards contracts will explore and measure each person's financial background and career path on an individual basis.
Appreciating the complexities of the contracting market
As a contractor you may be paid through an umbrella company or operate via a limited company. Lenders who offer mortgage solutions to contractors appreciate many contractors choose to use an umbrella facility for tax or National Insurance reasons.
Different lenders have different requirements when it comes to work history. Ideally you will have been contracting for 12 months or more as most contractor friendly lenders will expect 12 months prior history of contract work, although a few lenders will consider less than 12 months experience of contract work if the applicant has a previous background as a full time employee in the same occupation. Contractors tend to be employed on a short-term basis in 3 to 6 month contracts, because of this a lender will also want to see evidence of contract renewal or a new agreement with another employer.
We will guide to you to the right mortgage from the right lender
As a mortgage broker who focuses on providing mortgage guidance to contractors, we will advise you of your options and help you secure the mortgage you need. Contact us today for a no obligation initial consultation.