If you are a contractor, you may naturally have concerns about your eligibility for a mortgage and – perhaps equally importantly – what sort of contractor mortgage rates will be available to you. While many lenders have traditionally been more reluctant to lend to contractors in comparison to those in regular, salaried employment, that attitude has begun to shift in recent years.
With the percentage of UK workers who are contractors or otherwise self-employed ever increasing, more and more lenders now offer mortgages suitable for contractors, with assessment criteria more appropriately tailored to this type of employment. And the good news is that if the lender is satisfied with your ability to repay the mortgage, you are likely to have access to similar or the same interest rates and products to any other mortgage applicant.
Contractors Can Get Good Rates if They Can Prove Their Income
As with any other person applying for a mortgage, the crucial factor for contractors is to provide the lender with evidence that you can afford to repay the mortgage. For PAYE employees this is a fairly straightforward affair, as their salary can be verified by payslips and bank statements – usually no more than three months’ worth. For contractors and other self-employed workers, this typically isn’t relevant.
In the past, most lenders assessing contractor mortgage applications have asked to see three years’ accounts, which typically have to be prepared or certified by a chartered accountant. Although some lenders do still ask for three years’ accounts, it has become more common in recent years for some lenders to request a more reasonable record of income (for example just one year’s accounts) – this is particularly the case with more niche lenders who specialise in lending to contractors and the self-employed.
While underwriting criteria can vary – sometimes quite considerably – from one lender to the next, you can maximise your chance of a mortgage application being approved by ensuring you have all the necessary documentation required by the lender to hand before applying. This may take the form of your full business accounts, your SA302 tax calculation from HMRC and/or your current work contract and rate.
If your contract work is carried out through a limited company structure, it may be beneficial to discuss your mortgage plans with your accountant as early as possible – they could be able to advise on the best way to structure your salary, dividends and retained profits to balance between maximising tax efficiency and ensuring your accounts truly reflect your income when reviewed by a prospective lender for affordability.
Getting the Best Contract Mortgage Rates
The sheer range of mortgage products on the market – and the different criteria lenders use to assess contractor applicants – can make it difficult to track down the best mortgage out there. By using a mortgage broker with prior experience of contractor mortgages, you maximise your chances of getting the mortgage that best suits your unique circumstances – including deals from smaller and more specialised mortgage lenders beyond the high street. Contact Just Mortgage Brokers today to discuss your needs and let us help find the right contractor mortgage rate for you.