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Contractors understand that their way of working allows them more flexibility and fewer constraints. But equally there are problems that can arise as a result of working this way. This is especially true if you’re working as a contractor and are looking to secure a mortgage or other borrowing.
However, you shouldn’t despair because there are options out there for contractors and we know how to find the best mortgages suitable for you, at rates you might not get directly from lenders. Here’s more about what you should know when seeking a mortgage as a contractor.
How Your Income is Assessed for a Mortgage as a Contractor
As a contractor applying for a mortgage, you’ll be expected by most lenders to supply evidence of your earnings for the past 2-3 years. This differs from lender to lender and some may require less of a track record.
They’ll usually calculate an average income over a recent period of time to find out how much you’re likely to earn going forward. If your earnings vary a lot, they’ll either look at the most recent set or maybe judge your earnings at their lowest point. This isn’t ideal for borrowers because it can mean they end up having to borrow less than they could realistically afford to.
Sometimes, lenders will be happy to calculate how much you can borrow based on your daily contract rate to produce a mortgage offer. This will depend on the lender but some may want to see evidence of a 12-month contract before considering this option. Also you need to be aware that things like holidays and periods without contract employment may be taken into account by the lender.
Buying with Another Person
For many contractors, they’re only half of the equation when it comes to buying a home – that is if they’re buying with their partner. This can strengthen your position and make finding a mortgage far easier than it would otherwise be, especially if your partner who you’re buying with is in full-time employment. Their employment makes the prospect of lending money to you far less risky than it might otherwise be.
Ways to Strengthen Your Application
Making your employment more secure will help your application so, as a contractor, finding long-term agreements is always going to be beneficial. You should also consider working to improve your credit score before submitting an application because it can make a real difference to the outcome.
If you think a contractor mortgage is right for you or you simply want to find out more about how we can help you, don’t hesitate to get in touch. We’ll give you more details about the options open to you and discuss contractor mortgages in detail so that you can make an informed decision.